Do Remittances Hurt Domestic Prices? New Evidence from Low, Lower-Middle and Middle–Income Groups

We examine the remittances-inflation Nexus using System Generalized Method of Moments and bootstrap panel Granger causality approach. This study selected 58 countries from low, lower-middle and middle-income groups and tested the relationship using newly constructed remittances series. The outcome using the SGMM approach reveals that remittances have a negative and significant impact on inflation in low and lower-middle income countries, while positively influencing it in the middle-income group. Furthermore, remittances used for consumption and saving cause inflationary situation only in low and lower-middle income groups. The bootstrap panel Granger test results show that remittances have a strong impact on the prices of the lower-middle income countries. However, we find causality evidence only in one-fifth of the low and one-fourth of the middle-income countries. In general, the results are more country specific. The outcomes have significant policy implications for the researchers and decision-makers targeting the groups under study.