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Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants

Alpaslan Akay (), Alexandra Brausmann, Slobodan Djajic and Murat G. Kirdar
Additional contact information
Alpaslan Akay: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden, https://www.economics.gu.se
Alexandra Brausmann: Center of Economic Research, ETH
Slobodan Djajic: The Graduate Institute
Murat G. Kirdar: Bogaziçi University, Department of Economics, Natuk Birkan Binasi

No 735, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: How does saving behavior of immigrants respond to changes in purchasing power parity between the source and host countries? We examine this question by building a theoretical model of joint return-migration and saving decisions of temporary migrants and then test its implications by using data from the German Socioeconomic Panel on immigrants from 92 source countries. As implied by our theoretical model, we find that the saving rate increases in the nominal exchange rate but decreases in the source-country price level and that the absolute magnitude of both relationships increases as the time to retirement becomes shorter. At the median level of years to retirement, the absolute values of the elasticity of savings with respect to the nominal exchange rate and with respect to the source-country price level are both close to unity. Moreover, as we gradually restrict the sample to individuals with stronger return intentions, the estimated magnitudes become larger and their statistical significance higher.

Keywords: Migrants Savings; Return Migration; Exchange Rates; Prices; PPP (search for similar items in EconPapers)
JEL-codes: F22 J61 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur and nep-mig
Date: 2018-08
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