Workers' Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence
AbstractThis paper investigates the impact of workers’ remittances on equilibrium real exchange rates (ERER) in recipient economies. Using a small open economy model, it shows that standard “Dutch Disease” results of appreciation are substantially weakened or even overturned depending on: degree of openness, factor mobility between domestic sectors, and countercyclicality of remittances; the share of consumption in tradables; and the sensitivity of a country’s risk premium to remittance flows. Panel integration techniques on a large set of countries provide support for these analytical results, and show that ERER appreciation in response to sustained remittance flows tends to be quantitatively small.
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Bibliographic InfoPaper provided by Department of Economics, Williams College in its series Department of Economics Working Papers with number 2010-14.
Length: 57 pages
Date of creation: Sep 2010
Date of revision:
Other versions of this item:
- Adolfo Barajas & Ralph Chami & Dalia Hakura & Peter Montiel, 2011. "Workers’ Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence," Journal of LACEA Economia, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
- Ralph Chami & Adolfo Barajas & Peter Montiel & Dalia Hakura, 2010. "Workers' Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence," IMF Working Papers 10/287, International Monetary Fund.
- Adolfo Barajas & Ralph Chami & Dalia Hakura & Peter Montiel, 2010. "Workers' Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence," Center for Development Economics 2010-02, Department of Economics, Williams College.
- F24 - International Economics - - International Factor Movements and International Business - - - Remittances
- F31 - International Economics - - International Finance - - - Foreign Exchange
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- Farid MAKHLOUF & Mazhar MUGHAL, 2011. "Remittances, Dutch Disease, and Competitiveness - A Bayesian Analysis," Working Papers 2011-2012_1, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Dec 2011.
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