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Remittances and the Macroeconomy: The Case of Small Island Developing States

Author

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  • Amuedo-Dorantes, Catalina
  • Pozo, Susan
  • Vargas-Silva, Carlos

Abstract

In this paper we examine how remittances relate to the exchange rate, natural disasters and foreign aid in developing economies. By using panel VAR methods we are able to compensate for both data limitations and endogeneity among variables. We find that while foreign aid tends to appreciate the real exchange rate, remittances do not have the same impact. We also detect an inverse relationship between the real exchange rate and remittance amounts, with real exchange rate depreciation increasing remittance inflows. Of particular interest is the observation that the small island developing states subsample of countries behave differently from the full sample of developing countries in a number of ways. Of note is the differing impact of disaster shocks on the real exchange rate and on the level of remittances across the two samples.

Suggested Citation

  • Amuedo-Dorantes, Catalina & Pozo, Susan & Vargas-Silva, Carlos, 2007. "Remittances and the Macroeconomy: The Case of Small Island Developing States," WIDER Working Paper Series 022, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:rp2007-22
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    File URL: http://www.wider.unu.edu/sites/default/files/rp2007-22.pdf
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    Citations

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    Cited by:

    1. Giulia Bettin & Alberto Zazzaro, 2016. "The Impact of Natural Disasters on Remittances to Low- and Middle-income Countries," CSEF Working Papers 431, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    2. Deodat E. Adenutsi & Meshach J. Aziakpono & Matthew K. Ocran, 2011. "The Changing Impact Of Macroeconomic Environment On Remittance Inflows In Sub-Saharan Africa," Journal of Academic Research in Economics, Spiru Haret University, Faculty of Accounting and Financial Management Constanta, vol. 3(2 (July)), pages 136-167.
    3. Giulia Bettin & Andrea F. Presbitero & Nikola L. Spatafora, 2017. "Remittances and Vulnerability in Developing Countries," World Bank Economic Review, World Bank Group, vol. 31(1), pages 1-23.
    4. Díaz, Violeta & Soydemir, Gökçe, 2013. "Regional foreclosures and Mexican remittances: Evidence from the housing market crisis," The North American Journal of Economics and Finance, Elsevier, vol. 24(C), pages 74-86.
    5. L. De & J. Gaillard & W. Friesen & F. Smith, 2015. "Remittances in the face of disasters: a case study of rural Samoa," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 17(3), pages 653-672, June.

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