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Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants

Author

Listed:
  • Akay, Alpaslan

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Brausmann, Alexandra

    (Center of Economic Research, ETH)

  • Djajic, Slobodan

    (The Graduate Institute)

  • Kirdar, Murat G.

    (Bogaziçi University, Department of Economics, Natuk Birkan Binasi)

Abstract

How does saving behavior of immigrants respond to changes in purchasing power parity between the source and host countries? We examine this question by building a theoretical model of joint return-migration and saving decisions of temporary migrants and then test its implications by using data from the German Socioeconomic Panel on immigrants from 92 source countries. As implied by our theoretical model, we find that the saving rate increases in the nominal exchange rate but decreases in the source-country price level and that the absolute magnitude of both relationships increases as the time to retirement becomes shorter. At the median level of years to retirement, the absolute values of the elasticity of savings with respect to the nominal exchange rate and with respect to the source-country price level are both close to unity. Moreover, as we gradually restrict the sample to individuals with stronger return intentions, the estimated magnitudes become larger and their statistical significance higher.

Suggested Citation

  • Akay, Alpaslan & Brausmann, Alexandra & Djajic, Slobodan & Kirdar, Murat G., 2018. "Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants," Working Papers in Economics 735, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0735
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    References listed on IDEAS

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    Cited by:

    1. Jabbie, Mohamed & Jackson, Emerson Abraham, 2020. "On the Validity of Purchasing Power Parity (PPP): The Case of Sierra Leone," MPRA Paper 110659, University Library of Munich, Germany, revised 05 Jun 2020.

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    More about this item

    Keywords

    Migrants Savings; Return Migration; Exchange Rates; Prices; PPP;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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