Workersâ€™ Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence
This paper investigates the impact of workersâ€™ 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; counter cyclicality of remittances; the share of consumption in tradables; and the sensitivity of a countryâ€™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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- 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.
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"Remittances, Exchange Rate Regimes and the Dutch Disease: A Panel Data Analysis,"
Review of International Economics,
Wiley Blackwell, vol. 20(2), pages 377-395, 05.
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"External Balance in Low-Income Countries,"
in: NBER International Seminar on Macroeconomics 2009, pages 265-322
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- Yves Bourdet & Hans Falck, 2006. "Emigrants' remittances and Dutch Disease in Cape Verde," International Economic Journal, Taylor & Francis Journals, vol. 20(3), pages 267-284.
- Lopez, Humberto & Molina, Luis & Bussolo, Maurizio, 2007. "Remittances and the real exchange rate," Policy Research Working Paper Series 4213, The World Bank.
- Joannes Mongardini & Brett Rayner, 2009. "Grants, Remittances, and the Equilibrium Real Exchange Rate in Sub-Saharan African Countries," IMF Working Papers 09/75, International Monetary Fund.
- Martin Petri & Tahsin Saadi-Sedik, 2006. "To Smooth or Not to Smoothâ€”The Impact of Grants and Remittances on the Equilibrium Real Exchange Rate in Jordan," IMF Working Papers 06/257, International Monetary Fund.
- Pablo A. Acosta & Nicole Rae Baerg & Federico S. Mandelman, 2009. "Financial development, remittances, and real exchange rate appreciation," Economic Review, Federal Reserve Bank of Atlanta, pages 1-12.
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