Remittances as a determinant of the real exchange rate
Date
2007-04
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Abstract
Our study tries to find a relationship on workers' remittances on the real exchange rate. We performed time-series regression to examine the effects of remittances on the real exchange rate over a time horizon. We say that remittances do account for real exchange rate movements, both in the short-term and in the long-term. The increasing trend of remittances in the recent past make remittances account for greater changes in the real exchange rate in the near long-term, and more so in the short term. Government policy and trade openness remain as the strongest determinants of the movements of the real exchange rate. We find that trade openness appreciates the real exchange rate, in opposition to what has been proved in the literature.
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Keywords
Remittances, Foreign exchange, Currency valuation, Exchange rate, Macroeconomics