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Do Remittances Induce Inflation? Fresh Evidence from Developing Countries

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Author Info

  • Paresh Kumar Narayan

    ()
    (School of Accounting, Economics and Finance, 70 Edgar Road, Burwood, 3125, Melbourne, Australia)

  • Seema Narayan

    ()
    (School of Marketing, Economics and Finance, Royal Melbourne Institute of Technology, Melbourne, Australia)

  • Sagarika Mishra

    ()
    (School of Accounting, Economics and Finance, 70 Edgar Road, Burwood, 3125, Melbourne, Australia)

Abstract

The goal of this article is to examine the determinants of inflation in both the short run and the long run for 54 developing countries using a panel data set covering the 1995–2004 period. Apart from the commonly used economic determinants of inflation, we model the impact of remittances and institutional variables on inflation. Using the Arellano and Bond panel dynamic estimator and the Arellano and Bover and the Blundell and Bond system generalized method of moments estimator, we find evidence that in developing countries remittances generate inflation. The effect of remittances on inflation is more pronounced in the long run. Moreover, we find that openness, debt, current account deficits, the agricultural sector, and the short-term U.S. interest rate have a positive effect on inflation. We also find that improvements in democracy reduce inflation.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 77 (2011)
Issue (Month): 4 (April)
Pages: 914-933

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Handle: RePEc:sej:ancoec:v:77:4:y:2011:p:914-933

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Web page: http://www.southerneconomic.org/
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Cited by:
  1. Randazzo, Teresa & Piracha, Matloob, 2014. "Remittances and Household Expenditure Behaviour in Senegal," IZA Discussion Papers 8106, Institute for the Study of Labor (IZA).
  2. Termos, Ali & Naufal, George & Genc, Ismail, 2013. "Remittance outflows and inflation: The case of the GCC countries," Economics Letters, Elsevier, vol. 120(1), pages 45-47.
  3. Catalina Amuedo-Dorantes & Susan Pozo, 2012. "Remittance Income Volatility and Labor Supply in Mexico," Southern Economic Journal, Southern Economic Association, vol. 79(2), pages 257-276, October.
  4. Satti, Saqlain Latif & Shahbaz, Muhammad & Mujahid, Nooreen & Ali, Amjad, 2013. "Impact of Financial Development and Globalization on Inflation: The Role of Remittance and Economic Growth in Bangladesh," MPRA Paper 51675, University Library of Munich, Germany, revised 21 Nov 2013.

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