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Bilateral real exchange rates and migration

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  • Sekou Keita

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

Abstract

Migrants who move across borders are, to a large extent, motivated by the prospect of earning higher incomes at destination, which can be partly transferred back to their countries of origin via remittances. This suggests that the real exchange rate can influence the incentives to migrate, as it determines the purchasing power of expected income in terms of the currency of the origin country. This article investigates empirically how bilateral real exchange rate fluctuations influence international migration flows. To do so, we build a dataset of 30 OECD destination countries and 165 origin countries over the period 1980–2011 and estimate an equation derived from a micro-founded random utility maximization model that allows for unobserved heterogeneity between migrants and non-migrants. Our results show that migration flows are highly responsive to bilateral real exchange rates: A 10% real appreciation of the currency of the destination country is associated with an 18.2–19.4% increase in migration flows.

Suggested Citation

  • Sekou Keita, 2016. "Bilateral real exchange rates and migration," Post-Print halshs-01293438, HAL.
    • Handle: RePEc:hal:journl:halshs-01293438
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    Cited by:

    1. Jesus Mendoza & Nathan Ashby, 2019. "Mexican Migration Flows to the United States: The Impact of Business Cycles on Unauthorized Immigration to the United States," Economics Bulletin, AccessEcon, vol. 39(2), pages 798-815.
    2. Forte, Giuseppe & Portes, Jonathan, 2017. "Macroeconomic Determinants of International Migration to the UK," GLO Discussion Paper Series 69, Global Labor Organization (GLO).
    3. Lewis, John & Swannell, Matt, 2018. "The macroeconomic determinants of migration," Bank of England working papers 729, Bank of England.

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