Remittances and the Dutch disease in Sub-Saharan Africa. A Dynamic Panel Approach
AbstractThis paper investigates the effect of remittance inflows on the real exchange rate in Sub-Saharan Africa (SSA) using annual data from 1980 to 2008 for 34 SSA countries, generalised method of moments by Arellano and Bover (1995) andfeasible generalised least squares by Parks (1967) and Kmenta (1971, 1986). We find that when cross-sectional dependence and individual effects are controlled for, remittances to SSA as a whole appreciate the underlying real exchange rate ofrecipient countries. However the Dutch-disease effect is not experienced via the loss of export competitiveness, because the exchange rate appreciation is mitigated by monetary policy positioning and overdependence on imports due to low levels of domestic production in these countries. We also find reverse causality between remittances and the real exchange rate.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Economic Research Southern Africa in its series Working Papers with number 259.
Length: 21 pages
Date of creation: 2011
Date of revision:
Contact details of provider:
Postal: Newlands on Main, F0301 3rd Floor Mariendahl House, cnr Campground and Main Rds, Claremont, 7700 Cape Town
Phone: 021 671-3980
Fax: +27 21 671 3912
Web page: http://www.econrsa.org/
More information through EDIRC
Dutch disease; remittances; real exchange rate; Sub-Saharan Africa;
Other versions of this item:
- Emmanuel Owusu-Sekyere & Renee van Eyden & Francis Kemegue, 2011. "Remittances And The Dutch Disease In Sub-Saharan Africa: A Dynamic Panel Approach," Working Papers 201129, University of Pretoria, Department of Economics.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- F24 - International Economics - - International Factor Movements and International Business - - - Remittances
- F31 - International Economics - - International Finance - - - Foreign Exchange
- O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa
This paper has been announced in the following NEP Reports:
- NEP-AFR-2011-12-13 (Africa)
- NEP-ALL-2011-12-13 (All new papers)
- NEP-MIG-2011-12-13 (Economics of Human Migration)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sebastian Edwards, 1989. "Tariffs, Capital Controls, and Equilibrium Real Exchange Rates," Canadian Journal of Economics, Canadian Economics Association, vol. 22(1), pages 79-92, February.
- Matteo Bugamelli & Francesco Paterno, 2006.
"Do workers' remittances reduce the probability of current account reversals?,"
LSE Research Online Documents on Economics
19872, London School of Economics and Political Science, LSE Library.
- Bugamelli, Matteo & Paternò, Francesco, 2009. "Do Workers' Remittances Reduce the Probability of Current Account Reversals?," World Development, Elsevier, vol. 37(12), pages 1821-1838, December.
- Matteo Bugamelli & Francesco Paternò, 2006. "Do Workers' Remittances Reduce the Probability of Current Account Reversals?," CEP Discussion Papers dp0714, Centre for Economic Performance, LSE.
- Bugamelli, Matteo & Paterno, Francesco, 2005. "Do workers'remittances reduce the probability of current account reversals ?," Policy Research Working Paper Series 3766, The World Bank.
- Sebastian Edwards, 1989. "Real Exchange Rates in the Developing Countries: Concepts and Measure- ment," NBER Working Papers 2950, National Bureau of Economic Research, Inc.
- Ibrahim A. Elbadawi & Raimundo Soto, .
"Real Exchange Rates and Macroeconomic Adjustment in Sub-Sahara Africa and Other Developing Countries,"
ILADES-Georgetown University Working Papers
inv093, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
- Elbadawi, Ibrahim A & Soto, Raimundo, 1997. "Real Exchange Rates and Macroeconomic Adjustment in Sub-Saharan Africa and Other Developing Countries," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 74-120, Supplemen.
- Kempa, Bernd, 2005.
"An oversimplified inquiry into the sources of exchange rate variability,"
Elsevier, vol. 22(3), pages 439-458, May.
- Kempa, Bernd, 2003. "An oversimplified inquiry into the sources of exchange rate variability," IBES DiskussionsbeitrÃ¤ge 129, University of Duisburg-Essen, Faculty for Economics and Business Administration.
- Glytsos, Nicholas & Katseli, Louka Tarsitsa, 1986. "Theoretical and Empirical Determinants of International Labour Mobility: A Greek-German Perspective," CEPR Discussion Papers 148, C.E.P.R. Discussion Papers.
- Banerjee, A. & Marcellino, M. & Osbat, C., 2000.
"Some Cautions on the Use of Panel Methods for Integrated Series of Macro-economic Data,"
Economics Working Papers
eco2000/20, European University Institute.
- Anindya Banerjee & Massimiliano Marcellino & Chiara Osbat, 2004. "Some cautions on the use of panel methods for integrated series of macroeconomic data," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 322-340, December.
- Anindya Banerjee & Massimiliano Marcellino & Chiara Osbat, . "Some Cautions on the Use of Panel Methods for Integrated Series of Macro-Economic Data," Working Papers 170, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- El-Sakka, M. I. T. & McNabb, Robert, 1999. "The Macroeconomic Determinants of Emigrant Remittances," World Development, Elsevier, vol. 27(8), pages 1493-1502, August.
- Luciano Gutierrez, 2002. "On the power of panel cointegration tests: A Monte Carlo comparison. Economics Letters, 80(1):105-111," Econometrics 0211003, EconWPA, revised 20 May 2003.
- Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003.
"Testing for unit roots in heterogeneous panels,"
Journal of Econometrics,
Elsevier, vol. 115(1), pages 53-74, July.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
- Tom Doan, . "IPSHIN: RATS procedure to implement Im, Pesaran and Shin panel unit root test," Statistical Software Components RTS00098, Boston College Department of Economics.
- Francis M. Kemegue & Emmanuel Owusu-Sekyere & ReneÃ© van Eyden, 2011.
"What drives remittance inflows to Sub-Saharan Africa: A Dynamic Panel Approach,"
262, Economic Research Southern Africa.
- Francis Kemegue & Emmanuel Owusu-Sekyere & Renee van Eyden, 2011. "What Drives Remittance Inflows to Sub-Saharan Africa? A Dynamic Panel Approach," Working Papers 201128, University of Pretoria, Department of Economics.
- Elbadawi, Ibrahim & de Rezende Rocha, Robert, 1992. "Determinants of expatriate workers'remittances in North Africa and Europe," Policy Research Working Paper Series 1038, The World Bank.
- Rafael E. De Hoyos & Vasilis Sarafidis, 2006. "Testing for cross-sectional dependence in panel-data models," Stata Journal, StataCorp LP, vol. 6(4), pages 482-496, December.
- Sebastian Edwards, 1987.
"Exchange Controls, Devaluations and Real Exchange Rates: The Latin American Experience,"
NBER Working Papers
2348, National Bureau of Economic Research, Inc.
- Edwards, Sebastian, 1989. "Exchange Controls, Devaluations, and Real Exchange Rates: The Latin American Experience," Economic Development and Cultural Change, University of Chicago Press, vol. 37(3), pages 457-94, April.
- Sebastian Edwards, 1987. "Exchange Controls, Devaluations and Real Exchange Rates: The Latin American Experience," UCLA Economics Working Papers 450, UCLA Department of Economics.
- Ralph Chami & Connel Fullenkamp & Samir Jahjah, 2005.
"Are Immigrant Remittance Flows a Source of Capital for Development?,"
IMF Staff Papers,
Palgrave Macmillan, vol. 52(1), pages 55-81, April.
- Samir Jahjah & Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development," IMF Working Papers 03/189, International Monetary Fund.
- Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398.
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
- Amuedo-Dorantes, Catalina & Pozo, Susan, 2004. "Workers' Remittances and the Real Exchange Rate: A Paradox of Gifts," World Development, Elsevier, vol. 32(8), pages 1407-1417, August.
- Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
- Pablo A. Acosta & Emmanuel K.K. Lartey & Federico S. Mandelman, 2007.
"Remittances and the Dutch disease,"
2007-08, Federal Reserve Bank of Atlanta.
- Bazoumana Ouattara & Eric Strobl, 2008. "Foreign Aid Inflows And The Real Exchange Rate In The Cfa Franc Zone," Economie Internationale, CEPII research center, issue 116, pages 37-52.
- Sanjeev Gupta & Catherine A. Pattillo & Smita Wagh, 2007. "Impact of Remittanceson Poverty and Financial Development in Sub-Saharan Africa," IMF Working Papers 07/38, International Monetary Fund.
- Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yoemna Mosaval).
If references are entirely missing, you can add them using this form.