An Econometric Approach Towards Exploring the Impact of Workers Remittances on Inflation: Empirical Evidence from India

Vaishali Jain () and Monika Mathur ()
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Vaishali Jain: Christ (Deemed University)
Monika Mathur: Manipal University Jaipur

A chapter in Achieving $5 Trillion Economy of India, 2022, pp 293-303 from Springer

Abstract: Abstract This paper attempts to study short and long run impact of increased worker’s remittances on general price level. It uses the real GDP growth, real effective exchange rate (REER), M3 (broad money), fiscal deficit to gauge the impact of foreign remittances on inflation. The study makes use of VAR/VECM framework to gauge the impact of worker’s remittances on inflation. Inflation is measured in terms of CPI and WPI, real income or GDP at constant prices is taken as a measure of GDP growth, REER is used for exchange rates and M3 is taken as a proxy for money supply. Monthly data of all these variables has been taken from Bloomberg and World Bank data base. The findings provide important insights into the nature of association between remittances and inflation suggesting causality between inflation, remittances, real GDP, real effective exchange rates and money supply due to increased worker’s remittances. The findings have policy implications for decisions to channelize worker’s remittances in a way to increase real GDP growth and money supply while at the same time not causing the general price levels to soar. The present study focuses on how increased (decreased) worker’s remittances is leading to increase (decrease) in general price levels in India.

Keywords: Worker’s remittances; Consumer price index; Wholesale price index; Inflation; Exchange rate; Money supply; GDP; Vector autoregression; Granger causality (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-981-16-7818-9_14

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DOI: 10.1007/978-981-16-7818-9_14

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