The Impact of Remittances on the Exchange Rate: Empirical Analysis of The Gambia

Habib Ceesay and Medad Limbe

MPRA Paper from University Library of Munich, Germany

Abstract: Remittances are crucial to The Gambian economy, providing a major source of foreign exchange and sustaining the livelihoods of numerous households. In addition, they help in offsetting trade deficit and stabilize the country's external position. However, substantial external inflows into developing economies can lead to an appreciation of the domestic currency, making exports more expensive and reducing competitiveness. This study investigates the impact of remittances on the real effective exchange rate in The Gambia using monthly data from January 2009 to December 2019. Employing the Autoregressive Distributive Lag (ARDL) model, the study finds evidence of a long run cointegrating relationship among the variables. The empirical results reveal that remittance inflows have a positive significant effect on the real effective exchange rate in the long run, indicating that higher remittances lead to an appreciation of the Gambian Dalasi.

Keywords: Remittance; ARDL; the Gambia; exchange rate (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2024-08-20
New Economics Papers: this item is included in nep-afr, nep-fdg, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:121774

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