Do Remittances Facilitate a Sustainable Current Account?
AbstractWe examine how workers’ remittances impact on the current account. In doing so, we focus on how remittances affect the sustainability rather than size of current account balances. We find that the presence of remittances make it more likely that exports and imports are cointegrated thereby lending support to weak sustainability where increased remittances are associated with a faster speed of current account adjustment (lower persistence), particularly for those countries characterised by already highly persistent current account balances. We find that remittances are beneficial to the current account balance. This is in contrast to a literature that emphasises an adverse Dutch disease impact of workers’ remittances on the real exchange rate in terms of reduced external competitiveness.
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Bibliographic InfoPaper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 14/07.
Length: 21 pages
Date of creation: 30 Jun 2014
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remittances; current account; sustainability; panel cointegration;
Find related papers by JEL classification:
- F0 - International Economics - - General
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
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