Description: Remittances and the Real Exchange Rate

Remittances and the Real Exchange Rate

Existing empirical evidence indicates that remittances have a positive impact on a good number of development indicators of recipient countries. Yet when flows are too large relative to the size of the recipient economies, as those observed in a nu...

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Bibliographic Details
Main Authors:	Lopez, Humberto, Molina, Luis, Bussolo, Maurizio
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ABSOLUTE VALUE ADJUSTMENT PROCESS ADVERSE EFFECTS BANK BASE YEAR BUDGET CONSTRAINT CAPITA GROWTH CAPITA INCOME CAPITAL FLOWS CAPITAL INFLOW CAPITAL INFLOWS COUNTRY LEVEL CROSS COUNTRY CURRENT ACCOUNT CURRENT ACCOUNT DEFICIT DEPENDENT VARIABLE DEVALUATION DEVELOPING COUNTRIES DEVELOPMENT INDICATORS DISEQUILIBRIUM DOMESTIC ECONOMY ECONOMETRIC ISSUES ECONOMETRIC MODELS ECONOMETRICS ECONOMIC MODELS ECONOMIC OUTLOOK ECONOMICS ECONOMICS LITERATURE EFFECT OF REMITTANCES EMPIRICAL EVIDENCE EMPIRICAL LITERATURE EMPIRICAL MODEL EMPIRICAL RESULTS EMPIRICAL SECTION EQUILIBRIUM ERROR TERM ESTIMATED PARAMETER ESTIMATION TECHNIQUES EVOLUTION OF REMITTANCES EXCHANGE RATE DEPRECIATION EXCHANGE RATE MISALIGNMENT EXPLANATORY VARIABLES EXPORTS EXTERNAL SHOCKS FACTOR DEMAND FINANCIAL ASSETS FISCAL POLICY FIXED EFFECTS FIXED EFFECTS ESTIMATION FOREIGN CURRENCY GDP GDP PER CAPITA GLOBAL LEVEL GOVERNMENT CONSUMPTION GROWTH RATE GROWTH RATES HOME COUNTRY HOST COUNTRIES IMPACT OF REMITTANCES IMPORTANCE OF REMITTANCES INCOME EFFECT INCOME LEVELS INCOMES INCREASE IN REMITTANCES INFLATION TARGETS INTEREST RATES INTERNATIONAL COMPETITIVENESS INTERNATIONAL MARKETS INTERNATIONAL MONETARY FUND INTERNATIONAL REMITTANCES LABOR MARKET MACROECONOMIC EFFECTS MACROECONOMIC STABILITY MIGRANT WORKERS MIGRANTS MIGRATION PATTERNS NATURAL RESOURCES NEGATIVE IMPACT 0 HYPOTHESIS OPEN ECONOMY OUTPUT GROWTH OUTPUT PER CAPITA OUTPUT VOLATILITY OVERVALUATION OVERVALUED EXCHANGE OVERVALUED EXCHANGE RATES PER CAPITA GROWTH PER CAPITA INCOME POINT ESTIMATE POINT ESTIMATES POLICY MAKERS POLICY OPTIONS POLICY RESEARCH PRICE ADJUSTMENT PRICE TAKERS PRODUCTIVITY GROWTH REAL APPRECIATION REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATES REAL INTEREST REAL INTEREST RATE RECIPIENT COUNTRIES RELATIVE PRICE REMITTANCE REMITTANCE FLOWS REMITTANCE INFLOWS REMITTANCES REMITTANCES FLOWS SKILLED LABOR TAXATION TRADABLE GOODS TRADABLE SECTORS TRADE DEFICIT UTILITY FUNCTION VALUE ADDED WAGES WORKERS REMITTANCES
Online Access:	http://documents.worldbank.org/curated/en/2007/04/7543863/remittances-real-exchange-rate http://hdl.handle.net/10986/7069

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Summary:	Existing empirical evidence indicates that remittances have a positive impact on a good number of development indicators of recipient countries. Yet when flows are too large relative to the size of the recipient economies, as those observed in a number of Latin American countries, they may also bring a number of undesired problems. Among those probably the most feared in this context is the Dutch Disease. This paper explores the empirical evidence regarding the impact of remittances on the real exchange rate. The findings suggest that remittances indeed appear to lead to a significant real exchange rate appreciation. The paper also explores policy options that may somewhat offset the observed effect.

Remittances and the Real Exchange Rate

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