Dollars and Departures: Foreign Exchange Crises and Migration

The migration literature shows that labour-seeking and remittance-driven motives are central determinants of movement, with identifiable push and pull factors shaping flows across countries. Yet, the role of foreign exchange (FX) availability remains unexplored despite its relevance in small, open economies. We address this gap by introducing the concept of currency- seeking migration, where limited access to convertible currency acts as a push factor and the ability to earn FX abroad functions as a pull factor. Using Trinidad and Tobago, a country facing protracted FX shortages, we estimate autoregressive distributed lag (ARDL) models using data from 1975 to 2016 and find a long-run relationship in which a decline in net official reserves reduces net migration, signalling greater emigration pressures. We also observe a slow error- correction process, indicating that there is a sluggish adjustment toward long-run equilibrium as pressures or short-run disturbances persist once triggered. Our results are robust across multiple specifications using different measures of FX positions. We recommend improving access to FX as an essential step to reduce emigration pressures, achievable in the short-run through export reform, via more targeted protectionist policies, and export diversification. This can assist in stabilising the external balance and pave the way for more long-term structural reforms through exchange rate liberalisation.