Do Remittances Hurt Domestic Prices? New Evidence from Low, Lower-Middle and Middle–Income Groups

Adnan Khurshid (), Yin Kedong, Adrian Cantemir Calin and Oana Popovici
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Yin Kedong: Director and Head of Department, Email: dr.yinkedong@gmail.com, College of Economics, Department of Finance, Ocean University of China. Qingdao, China.

Journal for Economic Forecasting, 2016, issue 4, 95-114

Abstract: We examine the remittances-inflation Nexus using System Generalized Method of Moments and bootstrap panel Granger causality approach. This study selected 58 countries from low, lower-middle and middle-income groups and tested the relationship using newly constructed remittances series. The outcome using the SGMM approach reveals that remittances have a negative and significant impact on inflation in low and lower-middle income countries, while positively influencing it in the middle-income group. Furthermore, remittances used for consumption and saving cause inflationary situation only in low and lower-middle income groups. The bootstrap panel Granger test results show that remittances have a strong impact on the prices of the lower-middle income countries. However, we find causality evidence only in one-fifth of the low and one-fourth of the middle-income countries. In general, the results are more country specific. The outcomes have significant policy implications for the researchers and decision-makers targeting the groups under study.

Keywords: remittances; inflation; panel bootstrap Granger test; income groups; foreign exchange (search for similar items in EconPapers)
JEL-codes: C22 E31 F24 F31 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (9)

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