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Remittances and the real effective exchange rate

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  • Gazi M. Hassan
  • Mark J. Holmes

Abstract

We examine the long-run relationship between remittances and the real exchange rate for less-developed countries. In a key departure from the literature, we employ a panel cointegration approach using an innovative method for the measurement of the multilateral real effective exchange rate and we focus on high-remittance economies. We find a small inelastic, but significant, long-run relationship which confirms a Dutch disease type effect. The short-run relationship is explored using a panel vector error correction model which confirms that short-run causality is unidirectional running from remittances to the exchange rate. Potential asymmetries in this relationship are identified using quantile regression analysis.

Suggested Citation

  • Gazi M. Hassan & Mark J. Holmes, 2013. "Remittances and the real effective exchange rate," Applied Economics, Taylor & Francis Journals, vol. 45(35), pages 4959-4970, December.
    • Handle: RePEc:taf:applec:v:45:y:2013:i:35:p:4959-4970
    DOI: 10.1080/00036846.2013.808311
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    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • F0 - International Economics - - General
    • F1 - International Economics - - Trade
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances

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