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A DSGE-RBC Approach to Measuring Impacts of Wealth Transfers

Author

Listed:
  • Kurt Annen

    (Department of Economics and Finance, University of Guelph)

  • Michael Batu

    (Department of Economics and Finance, University of Guelph)

  • Stephen Kosempel

    (Department of Economics and Finance, University of Guelph)

Abstract

In this paper we quantify the impact of wealth transfers such as remittances and foreign aid using a DSGE-RBC model. We calibrate and simulate the model using data from 85 recipient countries. We show that positive wealth transfer shocks have a lagged positive response on output provided that persistence is sufficiently low, but these effects are small in comparison to other aggregate shocks. In fact, our calibration and simulation results suggest that wealth transfer shocks would need to be around nine times as large in order to produce the GDP volatility created by productivity shocks. The policy implications of our work primarily consist in providing guidance for research that tries to empirically estimate the aid-growth relationship.

Suggested Citation

  • Kurt Annen & Michael Batu & Stephen Kosempel, 2014. "A DSGE-RBC Approach to Measuring Impacts of Wealth Transfers," Working Papers 1404, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2014-04
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Azam & Syed Ali Raza, 2016. "Do Workers’ Remittances Boost Human Capital Development?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(2), pages 123-149.

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    More about this item

    Keywords

    Foreign aid; remittances; volatility; growth;
    All these keywords.

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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