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Remittances and the real exchange rate

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  • Lopez, Humberto
  • Molina, Luis
  • Bussolo, Maurizio

Abstract

Existing empirical evidence indicates that remittances have a positive impact on a good number of development indicators of recipient countries. Yet when flows are too large relative to the size of the recipient economies, as those observed in a number of Latin American countries, they may also bring a number of undesired problems. Among those probably the most feared in this context is the Dutch Disease. This paper explores the empirical evidence regarding the impact of remittances on the real exchange rate. The findings suggest that remittances indeed appear to lead to a significant real exchange rate appreciation. The paper also explores policy options that may somewhat offset the observed effect.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4213.

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Date of creation: 01 Apr 2007
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Handle: RePEc:wbk:wbrwps:4213

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Related research

Keywords: Economic Stabilization; Macroeconomic Management; Economic Theory&Research; Remittances; Achieving Shared Growth;

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References

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  1. Acosta, Pablo & Calderon, Cesar & Fajnzylber, Pablo & Lopez, Humberto, 2007. "What is the impact of international remittances on poverty and inequality in Latin America ?," Policy Research Working Paper Series 4249, The World Bank.
  2. Barzel, Yoram & McDonald, Richard J, 1973. "Assets, Subsistence, and The Supply Curve of Labor," American Economic Review, American Economic Association, American Economic Association, vol. 63(4), pages 621-33, September.
  3. Raghuram G. Rajan & Arvind Subramanian, 2005. "What Undermines Aid's Impact on Growth?," NBER Working Papers 11657, National Bureau of Economic Research, Inc.
  4. Susana Garcia Cervero & J. Humberto Lopez & Enrique Alberola Ila & Angel J. Ubide, 1999. "Global Equilibrium Exchange Rates," IMF Working Papers 99/175, International Monetary Fund.
  5. Frenkel, Jacob A. & Mussa, Michael L., 1985. "Asset markets, exchange rates and the balance of payments," Handbook of International Economics, Elsevier, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 14, pages 679-747 Elsevier.
  6. Enrique Alberola & Susana G. Cervero & Humberto Lopez & Angel Ubide, 2000. "Global Equilibrium Exchange Rates: Euro, Dollar, "Ins," "Outs," and Other Major Currencies in a Panel Cointegration Framework," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 0051, Econometric Society.
  7. Enrique Alberola & Humberto López, 1999. "Internal and External Exchange Rate Equilibrium in a Cointegration Framework. An Application to the Spanish Peseta," Banco de Espa�a Working Papers 9916, Banco de Espa�a.
  8. Aggarwal, Reena & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2006. "Do workers'remittances promote financial development ?," Policy Research Working Paper Series 3957, The World Bank.
  9. Jacob A. Frenkel & Michael L. Mussa, 1985. "Asset Markets, Exchange Rates and the Balance of Payments," NBER Working Papers 1287, National Bureau of Economic Research, Inc.
  10. Guillermo E. Perry & Omar S. Arias & J. Humberto López & William F. Maloney & Luis Servén, 2006. "Poverty Reduction and Growth : Virtuous and Vicious Circles," World Bank Publications, The World Bank, number 6997, August.
  11. Amuedo-Dorantes, Catalina & Pozo, Susan, 2004. "Workers' Remittances and the Real Exchange Rate: A Paradox of Gifts," World Development, Elsevier, Elsevier, vol. 32(8), pages 1407-1417, August.
  12. Enrique Alberola & Susana Garcia-Cervero & Humberto López & Angel Ubide, 2005. "Quo vadis Euro?," International Finance, EconWPA 0507004, EconWPA.
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