Grants, Remittances, and the Equilibrium Real Exchange Rate in Sub-Saharan African Countries

Brett Rayner and Joannes Mongardini

No 09/75, IMF Working Papers from International Monetary Fund

Abstract: This paper builds on the methodology developed by Chudik and Mongardini (2007) to estimate the relationship between grants and remittances and the equilibrium real exchange rate in Sub-Saharan African (SSA) countries using panel techniques. The results indicate that grants and remittances are not associated, in the long run, with an appreciation of the real effective exchange in SSA and are therefore not likely to give rise to Dutch disease effects. These findings suggest that grants and remittances may be serving to ease supply constraints or boost productivity in the non-tradable sector in the recipient economies.

Keywords: Capital inflows; Sub-Saharan Africa; Low-income developing countries; Inward remittances; Real effective exchange rates; Development assistance; Millennium Development Goals; Economic models (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-dev, nep-mig and nep-opm
Date: Written
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