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Are workers' remittances a hedge against macroeconomic shocks? The case of Sri Lanka

Author

Listed:
  • Erik Lueth

    (International Monetary Fund.)

  • Marta Ruiz-Arranz

    () (International Monetary Fund.)

Abstract

This paper estimates a vector error correction model for Sri Lanka in order to determine the response of remittance receipts to macroeconomic shocks. This is the first attempt of its kind in the literature. The authors found that remittance receipts are pro-cyclical and decline when the country’s currency weakens, undermining their usefulness as a shock absorber. On the other hand, remittances increase in response to oil-price shocks, reflecting the fact that most overseas Sri Lankan are employed in the Persian Gulf States. The pro-cyclicality of remittances calls into question the notion that remittances are largely motivated by altruism.

Suggested Citation

  • Erik Lueth & Marta Ruiz-Arranz, 2007. "Are workers' remittances a hedge against macroeconomic shocks? The case of Sri Lanka," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 14(1), pages 25-39, June.
  • Handle: RePEc:unt:jnapdj:v:14:y:2007:i:1:p:25-39
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    File URL: http://www.unescap.org/sites/default/files/apdj-14-1-2-Lueth-Arranz_0.pdf
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    References listed on IDEAS

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    1. El-Sakka, M. I. T. & McNabb, Robert, 1999. "The Macroeconomic Determinants of Emigrant Remittances," World Development, Elsevier, vol. 27(8), pages 1493-1502, August.
    2. Serdar Sayan, 2006. "Business Cycles and Workers' Remittances; How Do Migrant Workers Respond to Cyclical Movements of GDP At Home?," IMF Working Papers 06/52, International Monetary Fund.
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    Citations

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    Cited by:

    1. Komivi Afawubo & Mawuli Kodjovi Couchoro, 2017. "Do remittances enhance the economic growth effect of private health expenditures in West African Economic and Monetary Union?," Post-Print hal-01716433, HAL.
    2. repec:rss:jnljfe:v2i3p5 is not listed on IDEAS
    3. Jean-Louis COMBES & Christian EBEKE & Mireille NTSAMA ETOUNDI, 2011. "Are Foreign Aid and Remittances a Hedge against Food Price Shocks in Developing Countries?," Working Papers 201121, CERDI.
    4. Farid Farid, 2014. "The impact of exchange rate policy on remittances in Morocco: A Threshold VAR analysis," Economics Bulletin, AccessEcon, vol. 34(4), pages 2351-2360.
    5. Mazhar Y. Mughal & Junaid Ahmed, 2014. "Remittances and Business Cycles: Comparison of South Asian Countries," International Economic Journal, Taylor & Francis Journals, vol. 28(4), pages 513-541, December.
    6. Jamal Bouoiyour & Refk Selmi & Amal Miftah, 2017. "Relationship Between Remittances and Macroeconomic Variables in Times of Political and Social Upheaval: Evidence from Tunisia's Arab Spring," Working Papers 1140, Economic Research Forum, revised 09 2003.
    7. Combes, Jean-Louis & Ebeke, Christian Hubert & Etoundi, Sabine Mireille Ntsama & Yogo, Thierry Urbain, 2014. "Are Remittances and Foreign Aid a Hedge Against Food Price Shocks in Developing Countries?," World Development, Elsevier, vol. 54(C), pages 81-98.
    8. Ceyhun Bora Durdu & Serdar Sayan, 2010. "Emerging Market Business Cycles with Remittance Fluctuations," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 303-325, June.
    9. Dean Yang, 2011. "Migrant Remittances," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 129-152, Summer.
    10. International Monetary Fund, 2012. "Are Foreign Aid and Remittance Inflows a Hedge Against Food Price Shocks?," IMF Working Papers 12/67, International Monetary Fund.

    More about this item

    Keywords

    Workers' remittances; cyclicality; macroeconomic shock; vector error correction model;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F30 - International Economics - - International Finance - - - General
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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