Remittances, Exchange Rate Regimes and the Dutch Disease: A Panel Data Analysis

Abstract

Using disaggregated sectorial data for developing and transition countries, this study shows that rising levels of remittances have spending effects that may lead to real exchange rate appreciation, and resource movement effects that favor the nontradable sector at the expense of tradable goods production. These are two characteristics of the phenomenon known as “Dutch disease”. The results further suggest that resource movement effects that favor the nontradable sector should operate stronger under fixed nominal exchange rate regimes.

A panel data analysis of the growth effects of remittances

“…1 A third indirect growth effect of remittances is through its effect on the real exchange rate. Amuedo-Dorantes and Pozo (2004), Lopez, Molina and Bussolo (2007) and Lartey, Mandelman and Acosta (2008) have found that the exchange rate appreciates in countries with large remittances, which in turn has a negative effect on the growth rate; also see Acosta, Lartey and Mandelman (2007). Two other indirect effects of remittances that receive scant attention are firstly its effects on human capital 1 Growth effects of finance sector developments have been investigated by a number of works; see Ang (2008) for a survey.…”

Remittance and domestic labor productivity: Evidence from remittance recipient countries

“…Though Bayangos and Jansen (2011) using the experience of Philippines showed a significant positive effect of remittances on the domestic labor market and its competitiveness; however, the study does not account the effect of remittances on the labor productivity. Besides, McCormick and Wahba (2000) in their theoretical model though present a complete utility maximizing decision process to migration; however, the study failed to account the fact that an optimum decision must compensate the lost production at home due to potential high under-employment, an appreciation of the real exchange rate causing so-called Dutch disease effect (Acosta et al 2009;Bourdet and Falck, 2006;Lartey et al 2008;Vargas-Silva, 2009). Furthermore, McCormick and Wahba (2000)'s decision process is applicable only at micro level, and it does not consider the impact of remittances on domestic labor productivity for the recipient countries at macro level.…”

“…These include remittances and financial development (Shahbaz et al 2007, Nyamongo andMisati, 2011;Aggarwal et al 2010), remittances and sustainable economic development like welfare effect (Gupta, 2009;Siddiqui and Kemal 2006;Adams and Page 2005;Adam, 1993); economic growth effect (Taylor and Wyatt, 1996;Esman et al 2012); increasing consumption effect (Quartey and Blankson 2004); human capital formation (Edwards and Ureta, 2003;Hanson and Woodruff, 2003); remittances and education and schooling (Calero et al 2008;Richard et al 2010); remittances and Dutch disease (Acosta et al 2009;Bourdet and Falck, 2006;Lartey et al 2008;Vargas-Silva, 2009 etc. ), remittances and real exchange behavior (Amuedo-Dorantes and Pozo, 2004;Chami et al 2003) etc.…”

El impacto de las remesas en el crecimiento económico de América Latina, 1975-2012

“…Un mecanismo adicional de afectación asociado a las remesas es la posible apreciación del tipo de cambio real provocada por la llegada de divisas al país y por la inflación generada en ciertos sectores como el primario, lo que puede menoscabar la competitividad de estos productos y por consiguiente sus exportaciones (enfermedad holandesa), con un claro efecto negativo sobre el crecimiento económico (Bussolo 2007, Fajnzylber y López 2008, Grande Martín 2010, Lartey et al 2012. Acosta et al (2009) analizan el efecto del aumento de las remesas sobre la enfermedad holandesa en El Salvador.…”

“…AMÉRICA LATINA (1975-2012 América Latina, a partir de la segunda mitad del siglo XX, se convierte en una de las principales regiones emisoras de emigrantes hacia países desarrollados (Martínez Pizarro 2008). Según el IMLA (Investigación de la Migración Internacional en América Latina y el Caribe) tomando como referencia la información proporcionada por los censos nacionales de población y vivienda de 2000, de los 31 millones de emigrantes residentes en los países de la OCDE, América Latina y el Caribe aportaron 11 millones, convirtiéndose en los principales emisores de emigrantes a nivel mundial.…”