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Remittances and Real Effective Exchange Rate

Author

Listed:
  • Ujjal Protim Dutta
  • Partha Pratim Sengupta

Abstract

Remittances in India have been growing rapidly since 1991. Most of the studies find that remittance has had a significant impact on real effective exchange rate (REER). It is imperative to evaluate the impact of a transfer such as remittance and aid on country’s competitiveness. This article is an attempt to investigate the impact of workers’ remittances and some selected macro-variables on REER of India using annual data from 1980–2015. The study conducted autoregressive distributive lag (ARDL) bound test co-integration approach to explore this long-run relationship. The ARDL bound test approach confirms significant long-run relationships among the selected variables at 1 per cent level of significance. In addition to this, the ARDL short-run error correction model implies that while REER may temporarily deviate from its long-run equilibrium, the deviations adjust towards the equilibrium level in the long run. JEL: F31, F35, F41

Suggested Citation

  • Ujjal Protim Dutta & Partha Pratim Sengupta, 2018. "Remittances and Real Effective Exchange Rate," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 19(1), pages 124-136, March.
    • Handle: RePEc:sae:soueco:v:19:y:2018:i:1:p:124-136
    DOI: 10.1177/1391561418761077
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    More about this item

    Keywords

    Remittances; real effective exchange rate; official development assistance; competitiveness; co-integration;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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