Do Remittances Facilitate a Sustainable Current Account?

Gazi Hassan () and Mark Holmes ()

Working Papers in Economics from University of Waikato

Abstract: We examine how workers’ remittances impact on the current account. In doing so, we focus on how remittances affect the sustainability rather than size of current account balances. We find that the presence of remittances make it more likely that exports and imports are cointegrated thereby lending support to weak sustainability where increased remittances are associated with a faster speed of current account adjustment (lower persistence), particularly for those countries characterised by already highly persistent current account balances. We find that remittances are beneficial to the current account balance. This is in contrast to a literature that emphasises an adverse Dutch disease impact of workers’ remittances on the real exchange rate in terms of reduced external competitiveness.

Keywords: remittances; current account; sustainability; panel cointegration (search for similar items in EconPapers)
JEL-codes: F0 F4 O1 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2014-06-30
New Economics Papers: this item is included in nep-opm
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Do Remittances Facilitate a Sustainable Current Account? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:wai:econwp:14/07

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