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Remittances and the real effective exchange rate

Author

Listed:
  • Hassan, Gazi
  • Holmes, Mark
Abstract
We examine the long-run relationship between remittances and the real exchange rate for less developed countries using a panel cointegration approach. We employ an innovative method for the measurement of the multilateral real effective exchange rate and we focus on high remittance economies. We find a small inelastic, but significant, long-run relationship which confirms a “Dutch disease” type effect. Short-run confirmation is given by a panel error correction model. Potential asymmetries in this relationship are explored using quantile regression analysis.

Suggested Citation

  • Hassan, Gazi & Holmes, Mark, 2012. "Remittances and the real effective exchange rate," MPRA Paper 40084, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:40084
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    References listed on IDEAS

    as
    1. Connel Fullenkamp & Mr. Thomas F. Cosimano & Michael T. Gapen & Mr. Ralph Chami & Mr. Peter J Montiel & Mr. Adolfo Barajas, 2008. "Macroeconomic Consequences of Remittances," IMF Occasional Papers 2008/001, International Monetary Fund.
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    5. Joakim Westerlund, 2007. "Testing for Error Correction in Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(6), pages 709-748, December.
    6. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    7. Emmanuel K. K. Lartey & Federico S. Mandelman & Pablo A. Acosta, 2012. "Remittances, Exchange Rate Regimes and the Dutch Disease: A Panel Data Analysis," Review of International Economics, Wiley Blackwell, vol. 20(2), pages 377-395, May.
    8. Hnatkovska, Viktoria & Loayza, Norman, 2004. "Volatility and growth," Policy Research Working Paper Series 3184, The World Bank.
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    10. Adolfo Barajas & Ralph Chami & Dalia Hakura & Peter Montiel, 2011. "Workers’ Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 45-99, January.
    11. B. Bhaskara Rao & Gazi Mainul Hassan, 2012. "Are the Direct and Indirect Growth Effects of Remittances Significant?," The World Economy, Wiley Blackwell, vol. 35(3), pages 351-372, March.
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    15. Michael T. Gapen & Mr. Ralph Chami & Mr. Peter J Montiel & Mr. Adolfo Barajas & Connel Fullenkamp, 2009. "Do Workers’ Remittances Promote Economic Growth?," IMF Working Papers 2009/153, International Monetary Fund.
    16. Dilip Ratha & Sanket Mohapatra & Ani Silwal, 2009. "Outlook for Remittance Flows 2009-2011 : Remittances Expected to Fall by 7-10 Percent in 2009," World Bank Publications - Reports 10975, The World Bank Group.
    17. Yves Bourdet & Hans Falck, 2006. "Emigrants' remittances and Dutch Disease in Cape Verde," International Economic Journal, Taylor & Francis Journals, vol. 20(3), pages 267-284.
    18. Bichaka Fayissa & Christian Nsiah, 2012. "Financial Development and Remittances in Africa and the Americas: A Panel Unit-Root Tests and Panel Cointegration Analysis," Working Papers 201201, Middle Tennessee State University, Department of Economics and Finance.
    19. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
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    21. repec:bla:scandj:v:87:y:1985:i:4:p:647-57 is not listed on IDEAS
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    More about this item

    Keywords

    Remittances; Real Effective Exchange Rate; Panel cointegration; Panel error correction; Quantile regression;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • F0 - International Economics - - General
    • F1 - International Economics - - Trade
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances

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