The Macroeconomic Impact of Remittances: A sending country perspective
AbstractUsing data for Germany, we analyze the impact of migration and remittances by developing an open-economy general equilibrium model with heterogeneous households. Within the model, the flows of remittances depend on the altruism of households. Households with higher altruism coefficient derive a higher utility from consumption of distant household members. Estimating the interrelation between household characteristic and remittances, we are able to derive altruism coefficients for different types of households. Applying the coefficients to our model, we show that remittances affect the macroeconomy primarily through the real exchange rate channel. Stronger remittances outflows depreciate the real exchange rate and give incentives to reallocate resources from the non-tradable towards tradable goods sectors. In the case of Germany, this translates into a converse dutch disease phenomenon.
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Bibliographic InfoPaper provided by Norface Research Programme on Migration, Department of Economics, University College London in its series Norface Discussion Paper Series with number 2012021.
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EU Eastern enlargement; remittances; international migration; computable equilibrium model;
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