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The effect of remittances on the current account in developing and emerging economies

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  • Emmanuel K. K. Lartey

Abstract

This paper presents an analysis of the effect of remittances on the current account in developing and emerging economies, incorporating an assessment of the extent to which exchange rate regimes impact the relationship. The main findings suggest that there is a positive effect of remittances on the current account contemporaneously, but that the lagged effect is negative, which could be indicative of the existence of some underlying mechanisms characteristic of the Dutch disease phenomenon. In addition, the results show that a more flexible exchange regime dampens the contemporaneous positive effect that remittances have on the current account. The paper, therefore, asserts that policymakers face trade‐offs pertaining to the use of exchange rate policy in managing the effects of remittances on the current account, which should be given due consideration when such policy choices are made.

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  • Emmanuel K. K. Lartey, 2019. "The effect of remittances on the current account in developing and emerging economies," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 48(3), November.
    • Handle: RePEc:bla:ecnote:v:48:y:2019:i:3:n:e12149
    DOI: 10.1111/ecno.12149
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    Cited by:

    1. Coulibaly, Dramane & Gnimassoun, Blaise & Mignon, Valérie, 2020. "The tale of two international phenomena: Migration and global imbalances," Journal of Macroeconomics, Elsevier, vol. 66(C).
    2. Dramane Coulibaly & Blaise Gnimassoun, 2022. "Emigration and Capital Flows: Do Migrants’ Skills Matter?," Working Papers of BETA 2022-31, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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