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The remittance multiplier (-1) theorem

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  • Luis Alonso González
  • Bruno Sovilla

Abstract

This article analyzes the effect of remittances on aggregate demand and equilibrium income within a Keynesian model. Our analysis demonstrates that the composition of aggregate demand varies because remittances produce an increase in consumption and a contraction in the external sector. The total value of aggregate demand is then reduced by the value of remittances in national currency. Consequently, we confirm that the remittance multiplier is (-1).

Suggested Citation

  • Luis Alonso González & Bruno Sovilla, 2014. "The remittance multiplier (-1) theorem," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 36(3), pages 541-554.
    • Handle: RePEc:mes:postke:v:36:y:2014:i:3:p:541-554
    DOI: 10.2753/PKE0160-3477360307
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    Cited by:

    1. Daren Conrad & Benjamin Ramkissoon & Sara Mohammed, 2018. "Back to Basics: Remittances in the Keynesian Macroeconomic Framework," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 24(3), pages 233-238, August.

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