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The Macroeconomic Impact of Remittances: A sending country perspective


  • Timo Baas

    () (Department of Economics, University of Essen-Duisburg)

  • Silvia Maja Melzer

    () (Department of Sociology, University of Bielefeld)


Using data for Germany, we analyze the impact of migration and remittances by developing an open-economy general equilibrium model with heterogeneous households. Within the model, the flows of remittances depend on the altruism of households. Households with higher altruism coefficient derive a higher utility from consumption of distant household members. Estimating the interrelation between household characteristic and remittances, we are able to derive altruism coefficients for different types of households. Applying the coefficients to our model, we show that remittances affect the macroeconomy primarily through the real exchange rate channel. Stronger remittances outflows depreciate the real exchange rate and give incentives to reallocate resources from the non-tradable towards tradable goods sectors. In the case of Germany, this translates into a converse dutch disease phenomenon.

Suggested Citation

  • Timo Baas & Silvia Maja Melzer, 2012. "The Macroeconomic Impact of Remittances: A sending country perspective," Norface Discussion Paper Series 2012021, Norface Research Programme on Migration, Department of Economics, University College London.
  • Handle: RePEc:nor:wpaper:2012021

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    References listed on IDEAS

    1. Dean Yang, 2008. "International Migration, Remittances and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks," Economic Journal, Royal Economic Society, vol. 118(528), pages 591-630, April.
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    1. repec:dau:papers:123456789/14850 is not listed on IDEAS
    2. Anda David & Mohamed Ali Marouani, 2013. "The Impact of Labor Mobility on Unemployment: A Comparison between Jordan and Tunisia," Working Papers 823, Economic Research Forum, revised Dec 2013.
    3. World Bank Group, 2015. "Malaysia Economic Monitor, December 2015," World Bank Other Operational Studies 23565, The World Bank.
    4. Hathroubi, Salem & Aloui, Chaker, 2016. "On interactions between remittance outflows and Saudi Arabian macroeconomy: New evidence from wavelets," Economic Modelling, Elsevier, vol. 59(C), pages 32-45.
    5. Anda David & Mohamed Ali Marouani, 2015. "Migration and Employment Interactions in a Crisis Context: the case of Tunisia," Working Papers 20150007, Université Paris 1 Panthéon Sorbonne, UMR Développement et Sociétés.
    6. repec:dau:papers:123456789/14987 is not listed on IDEAS
    7. Fusshoeller, Chantal & Balleer, Almut, 2017. "Migration and investment: a business cycle perspective," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168125, Verein für Socialpolitik / German Economic Association.
    8. repec:eee:touman:v:65:y:2018:i:c:p:212-223 is not listed on IDEAS

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    EU Eastern enlargement; remittances; international migration; computable equilibrium model;

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