Back to Basics: Remittances in the Keynesian Macroeconomic Framework

Daren Conrad (), Benjamin Ramkissoon and Sara Mohammed
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Daren Conrad: The University of the West Indies
Sara Mohammed: The University of the West Indies

International Advances in Economic Research, 2018, vol. 24, issue 3, No 2, 233-238

Abstract: Abstract This paper examines a remittance multiplier based on the short-run Keynesian equilibrium approach and shows how income may be affected by remittance inflows. We explore this through the equilibrium in the goods and money markets, where remittances can affect both consumption and the demand for real money balances. We present this simple theoretical model utilizing a standard Keynesian framework. The short-run Keynesian equilibrium approach provides insight into how remittances affect output and income, and its potential multiplier effects. The model used is indicative of a positive relationship between the marginal propensity to consume out of remittances and the multiplier. The framework also shows that remittances will have a greater impact if its marginal propensity to consume is greater than that for standard disposable income.

Keywords: Remittances; IS-LM model; Keynesian equilibrium; National income (search for similar items in EconPapers)
JEL-codes: E00 E20 F20 O10 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:kap:iaecre:v:24:y:2018:i:3:d:10.1007_s11294-018-9703-y

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DOI: 10.1007/s11294-018-9703-y

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