Remittances and the real effective exchange rate

Hassan, Gazi; Holmes, Mark J.

doi:10.1080/00036846.2013.808311

Cited by 52 publications

(33 citation statements)

References 23 publications

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“…All real GDP data are expressed in constant US dollars. Finally, the real exchange rate is measured as the real effective exchange rate as the relative price of tradable goods to non‐tradable goods produced in the domestic economy following the methodology of Hassan and Holmes ().…”

Section: Methodsmentioning

confidence: 99%

How Do Workers’ Remittances Respond to Lending Rates?

Hassan

Holmes

2018

International Migration

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The literature on migrants’ motivation to remit ranges from self‐interest to altruism where studies analyse the impact from home country interest rates or interest differentials between home and host countries. We reinterpret the interest rate elasticity of remittances as a form of debt‐repayment responsiveness rather than based on opportunistic motivation. Modelling altruistic transfer and debt‐repayment, we find that, for a panel of countries, the long‐run responsiveness of remittances to changes in real lending rates is negative. This suggests that an expansionary (contractionary) monetary policy is most likely to lead to an increase (reduction) in remittances in the long‐run. In contrast to this, the short‐run impact of interest rate changes on remittances is positive.

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Section: Methodsmentioning

confidence: 99%

How Do Workers’ Remittances Respond to Lending Rates?

Hassan

Holmes

2018

International Migration

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“…However, the study did not make use of the real effective exchange rate. Several studies (Sultonov, ; Hassan and Holmes, ; Kyzy, ; Ryota, ; Brahim et al., , among others) reported that the real effective exchange rate describes the purchasing power and trade competitiveness more effectively, and therefore is more suitable and widely used in the diagnosis of “Dutch Disease” than the real and the nominal exchange rate. In other words, the findings of Osigwe and Obi () did not explicitly show whether the inflow of remittances cause Dutch disease in Nigeria or not; neither did it link its finding to export competitiveness.…”

Section: Literature Reviewmentioning

confidence: 99%

Do Migrant Remittances Cause Dutch Disease in Nigeria?

Urama

Edeh²,

Urama

2019

International Migration

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Statistics show that remittances inflow to Nigeria grew from US$3,000,000 in 1978 to over US$22 billion in 2017. Theoretically, such a large inflow of foreign currency into an economy may lead to Dutch diseases. This study, therefore, investigated whether the massive inflow of remittances into the economy causes Dutch disease. Given that the model had both I(0) and I(1) variables, ARDL/Bound testing methodology was used with annual data from 1981 to 2016. The ARDL result showed that migrant remittances have a significant positive effect on the real effective exchange rate in Nigeria in the long run. Specifically, a one per cent increase in the inflows of remittances increases the real effective exchange rate of Naira by 0.44 per cent in the long run. This appreciation of the Nigerian Naira relative to other competing nations encourages import and discourages export, leading to the Dutch disease effect.

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“…For instance, Chami et al (2008) relate the moral hazard problem with altruistic motives of sending remittances and find a negative effect on growth. In addition, it is possible that remittances create a Dutch disease effect causing a downward pressure on the real exchange rate and thus an appreciation of domestic currency (Acosta, Fajnzylber, and Lopez 2007;Chami et al 2008;Hassan and Holmes 2013). Similarly, remittances strongly respond negatively to exchange rate uncertainty (Higgins, Hysenbegasi, and Pozo 2004), and where the remittance mix in terms of consumption and investment is biased towards former (Stahl and Arnold 1986), there is little positive contribution to growth and reduction in labour force participation (Chami et al 2008).…”

Section: Remittance-led Growth Hypothesismentioning

confidence: 99%

Revisiting the threshold effect of remittances on total factor productivity growth in South Asia: a study of Bangladesh and India

et al. 2017

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Both Bangladesh and India are among the top recipient of remittances in absolute terms. However, in relative terms -remittances as a per cent of GDP -the two countries stand at 6.1% and 2.8%, respectively, well below the levels of the top 10 recipients. In this article, we explore the effect of remittances on the total factor productivity (TFP) growth considering Bangladesh and India, as reference countries over the periods 1980-2012 and 1977-2012, respectively. We examine the presence of a long-run association between remittances and TFP using a number of tests. The results indicate that remittances have threshold effects on TFP growth in both countries. Despite the two countries receiving substantial amount of remittances, we note that Bangladesh has a U-shaped relationship whereas India has an inverted U-shaped relationship with TFP growth. For Bangladesh, a minimum threshold of remittances (% GDP) is 5.3% and for India, a tipping point of remittances (% GDP) is at 1.8%. The causality tests confirm a bidirectional effect, which implies that remittances and TFP growth are mutually reinforcing. Interestingly, while the two economies have similar remittances impact in regards to causality, the study highlights two different tipping points of remittances.

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Remittances and the real effective exchange rate

Cited by 52 publications

References 23 publications

How Do Workers’ Remittances Respond to Lending Rates?

How Do Workers’ Remittances Respond to Lending Rates?

Do Migrant Remittances Cause Dutch Disease in Nigeria?

Revisiting the threshold effect of remittances on total factor productivity growth in South Asia: a study of Bangladesh and India

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