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Economic policy uncertainty and remittances: mediating role of foreign exchange rate

Author

Listed:
  • Waqas Bin Khidmat

    (Air University Islamabad, Aerospace and Aviation Campus Kamra)

  • Nayar Rafique

    (Air University Islamabad, Aerospace and Aviation Campus Kamra)

  • Muhammad Umar

    (Wuhan College)

Abstract

Recent studies provide evidence that economic policy uncertainty (EPU) is linked with the workers' remittances, yet the channel through which EPU affects the workers' remittances has been less explored. To understand the above said channel, this study uses monthly data from Pakistan, which ranges from January 2015 to November 2022. Based on the results obtained by using different econometric techniques, this study provides evidence that the foreign exchange rate mediates the relationship between EPU (both global and domestic) and workers' remittances. Additionally, it finds that the domestic EPU mediates the relationship between the global EPU and the exchange rate. Interestingly, the results highlight the limited influence of altruistic motives on remittances instead the findings suggest the prevalence of self-interest as the dominant driving factor behind workers’ remittances in the case of Pakistan. The findings of this study have implications for policymakers and stakeholders in formulating effective strategies to harness the potential of workers’ remittances for economic development and welfare enhancement in Pakistan.

Suggested Citation

  • Waqas Bin Khidmat & Nayar Rafique & Muhammad Umar, 2024. "Economic policy uncertainty and remittances: mediating role of foreign exchange rate," Economic Change and Restructuring, Springer, vol. 57(4), pages 1-30, August.
    • Handle: RePEc:kap:ecopln:v:57:y:2024:i:4:d:10.1007_s10644-024-09725-7
    DOI: 10.1007/s10644-024-09725-7
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