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How do international remittances respond to real exchange rate movements?

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  • Michael Bleaney
  • Mo Tian

Abstract

Shifts in the bilateral real exchange rate between the countries of migrants’ origin and destination alter the real value of international remittances in origin currency relative to their real value in destination currency. Theoretical models predict a response in the form of some adjustment in remittances, measured in either currency. We construct real effective exchange rates weighted by migrant stocks for a large sample of countries to investigate the matter empirically. The evidence shows that remittances as a share of destination countries’ GDP tend to remain virtually unchanged, so that real exchange rate movements predominantly affect the real value of remittances in terms of origin countries’ currency. Possible explanations of this are discussed.

Suggested Citation

  • Michael Bleaney & Mo Tian, 2019. "How do international remittances respond to real exchange rate movements?," Discussion Papers 2019-06, University of Nottingham, CREDIT.
    • Handle: RePEc:not:notcre:19/06
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    File URL: https://www.nottingham.ac.uk/credit/documents/papers/2019/19-06.pdf
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    Cited by:

    1. Hannes Warnecke-Berger, 2022. "The financialization of remittances and the individualization of development: A new power geometry of global development," Environment and Planning A, , vol. 54(4), pages 702-721, June.

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    Keywords

    exchange rates; migration; remittances;
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