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Remittances, exchange rate regimes, and the Dutch disease: a panel data analysis

  • Emmanuel K.K. Lartey
  • Federico S. Mandelman
  • Pablo A. Acosta

Using disaggregated sectorial data, this study shows that rising levels of remittances have spending effects that lead to real exchange rate appreciation and resource movement effects that favor the nontradable sector at the expense of tradable goods production. These characteristics are two aspects of the phenomenon known as Dutch disease. The results further indicate that these effects operate more strongly under fixed nominal exchange rate regimes.

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Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2008-12.

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Date of creation: 2008
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Handle: RePEc:fip:fedawp:2008-12
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  1. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  2. Edwards, Sebastian, 1989. "Exchange Rate Misalignment in Developing Countries," World Bank Research Observer, World Bank Group, vol. 4(1), pages 3-21, January.
  3. Amuedo-Dorantes, Catalina & Pozo, Susan, 2004. "Workers' Remittances and the Real Exchange Rate: A Paradox of Gifts," World Development, Elsevier, vol. 32(8), pages 1407-1417, August.
  4. Acosta, Pablo & Calderon, Cesar & Fajnzylber, Pablo & Lopez, Humberto, 2008. "What is the Impact of International Remittances on Poverty and Inequality in Latin America?," World Development, Elsevier, vol. 36(1), pages 89-114, January.
  5. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, 02.
  6. World Bank, 2008. "The Migration and Remittances Factbook 2008," World Bank Publications, The World Bank, number 6383.
  7. 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.
  8. Pablo A. Acosta & Emmanuel K.K. Lartey & Federico S. Mandelman, 2007. "Remittances and the Dutch disease," Working Paper 2007-08, Federal Reserve Bank of Atlanta.
  9. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  10. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  11. Lopez, Humberto & Molina, Luis & Bussolo, Maurizio, 2007. "Remittances and the real exchange rate," Policy Research Working Paper Series 4213, The World Bank.
  12. Adams, Richard Jr. & Page, John, 2005. "Do international migration and remittances reduce poverty in developing countries?," World Development, Elsevier, vol. 33(10), pages 1645-1669, October.
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