Workers' Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence

Adolfo Barajas, Ralph Chami, Dalia Hakura and Peter Montiel

No 2010-12, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: This paper investigates the impact of workers' remittances on equilibrium real exchange rates (ERER) in recipient economies. Using a small open economy model, it shows that standard "Dutch Disease" results of appreciation are substantially weakened or even overturned depending on: degree of openness, factor mobility between domestic sectors, and countercyclicality of remittances; the share of consumption in tradables; and the sensitivity of a country's risk premium to remittance flows. Panel integration techniques on a large set of countries provide support for these analytical results, and show that ERER appreciation in response to sustained remittance flows tends to be quantitatively small.

Keywords: Remittances; Real Exchange Rate; Dutch Disease (search for similar items in EconPapers)
JEL-codes: F24 F31 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2010-09
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Citations: View citations in EconPapers (40)

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Related works:
Journal Article: Workers’ Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence (2011)
Working Paper: Workers’ Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence (2010)
Working Paper: Workers' Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence (2010)
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