Exchange Rate Flexibility and the Effect of Remittances on Economic Growth
This paper studies the question of whether exchange rate policy affects the impact of remittances on economic growth in recipient countries. The paper utilizes a comprehensive data set that comprises annual observations for 135 developing and trans...
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/731271483452591548/Exchange-rate-flexibility-and-the-effect-of-remittances-on-economic-growth http://hdl.handle.net/10986/25835 |
| Summary: | This paper studies the question of
whether exchange rate policy affects the impact of
remittances on economic growth in recipient countries. The
paper utilizes a comprehensive data set that comprises
annual observations for 135 developing and transition
countries, spanning 1970-2007. The data for exchange rate
regimes is based on the Reinhart and Rogoff exchange rate
regime classification, whereas the data for remittances and
all other variables are from the World Bank's World
Development Indicators database. The findings indicate that
more flexible exchange rate regimes are associated with a
greater increase in economic growth following an increase in
remittances, but also that the impact of remittances on
growth is positive under a fixed exchange rate regime. The
estimates suggest that a 1 percent increase in remittances
increases per capita growth by about 0.79 percent under a
fixed exchange rate regime, and that this effect increases
by about 0.13 percent for a 1 point increase in the exchange
rate flexibility index. The results further suggest that the
effect of remittances under a fixed exchange rate regime is
positive in less financially developed countries as well,
but do not provide conclusive evidence that this effect
varies inversely with exchange rate flexibility in such
economies as theorized. |
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