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Workers´ Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence

  • Adolfo Barajas

    ()

  • Ralph Chami

    ()

  • Dalia Hakura

    ()

  • Peter Montiel

    ()

"This 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 cointegration 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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Article provided by ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION in its journal ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.

Volume (Year): (2011)
Issue (Month): ()
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Handle: RePEc:col:000425:008449
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  18. Mario Holzner, 2006. "Real Exchange Rate Distortion in Southeast Europe," wiiw Balkan Observatory Working Papers 68, The Vienna Institute for International Economic Studies, wiiw.
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