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How Do Workers' Remittances Respond to Lending Rates?

Gazi Hassan () and Mark Holmes ()

Working Papers in Economics from University of Waikato

Abstract: We develop a simple model of altruistic transfer and debt-repayment showing that for plausible parameter values, the long-run effect of a change in real lending rates on remittance sending may be negative. Using data for a sample of eighty countries over a 1995-2014 study period, estimation by panel ARDL confirms a negative long-run role for real lending rates. We also find that remittance sending is more sensitive to real rates in the case of the high remittance-receiving countries, while less sensitive in the case of low remittance-receiving countries. An analysis of the dynamics of adjustment suggests that the short-run impact of interest rate changes on remittances is very limited.

Keywords: remittances; real interest rates; panel ARDL (search for similar items in EconPapers)
JEL-codes: F0 F4 O1 (search for similar items in EconPapers)
Date: 2017-02-22
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