Remittances and Currency Crisis: The Case of Developing and Emerging Countries

Jounghyeon Kim

Emerging Markets Finance and Trade, 2013, vol. 49, issue 6, 88-111

Abstract: Employing the first-generation currency crisis model of Flood and Garber (1984), I explore the financial effects of migrants' remittances on the economies of developing and emerging countries in a currency crisis. The model implies that remittances can contribute to a reduction in the likelihood of a currency crisis and appreciation in foreign exchange rates via the promotion of foreign exchange reserves. Panel estimation with twelve developing and emerging countries that previously experienced financial crises confirms the implications, suggesting that migrants' remittances can play a significant role in mitigating financial constraints and thus contribute to financial stability.

Keywords: currency crisis; foreign exchange rate and reserves; migrants' remittances (search for similar items in EconPapers)
Date: 2013
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