Do Remittances Induce Inflation? Fresh Evidence from Developing Countries
AbstractThe 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 InfoArticle provided by Southern Economic Association in its journal Southern Economic Journal.
Volume (Year): 77 (2011)
Issue (Month): 4 (April)
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
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