Remittances, Inflation and Exchange Rate Regimes in Small Open Economies

Christopher Ball (), Claude Lopez, Javier Reyes and Martha Cruz-Zuniga

MPRA Paper from University Library of Munich, Germany

Abstract: Remittances are private monetary transfers. Yet the rapidly growing literature on the subject often ignores the role that exchange rate regimes play in determining the effect remittances have on a recipient economy. This paper uses a theoretical model and panel vector autoregression techniques to explore the role exchange rate regimes play in understanding the effect of remittances. The analysis considers yearly and quarterly data for seven Latin American countries. Our theoretical model predicts that remittances should temporarily increase inflation and generate an increase in the domestic money supply under a fixed regime, but temporarily decrease inflation and generate no change in the money supply under a flexible regime. These differences are borne out in the data. This adds to our understanding of the true effect of remittances on economies and suggests that other results in the literature that do not control for regimes may be biased.

Keywords: Remittances; exchange rate regimes (search for similar items in EconPapers)
JEL-codes: F22 F41 (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mig and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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https://mpra.ub.uni-muenchen.de/22648/1/MPRA_paper_22648.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/39852/2/MPRA_paper_39852.pdf revised version (application/pdf)

Related works:
Journal Article: Remittances, Inflation and Exchange Rate Regimes in Small Open Economies (2013)
Working Paper: Remittances, Inflation and Exchange Rate Regimes in Small Open Economies (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:22648

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