ABSTRACT
In this paper, using the GMM technique we attempt to empirically investigate the Dutch disease effect of remittances. The analyses are based on an annual balanced panel data set for 18 developing countries, which have remittances to GDP ratio of 5 percent and above, over the years 1999–2015. It is found that an inflow of remittances has a positive effect on economic growth, whereas it leads to a depreciation of the real effective exchange rate.
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Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1 The real effective exchange rate (reer) is defined as follows:
where ner is the nominal exchange rate of the country i;
is the consumer price index (CPI) of major trading partners;
is the CPI of the home country;
is the trade weight relative to the major trading partners; i(1, 2, … , n) is the number of major trading partners.
2 The model is given by: . The null hypothesis of
will be tested against the alternative hypothesis of
.
3 The model is given by: . The null hypothesis of
for all i will be tested against the alternative hypothesis of
for at least one i.
Additional information
Notes on contributors
Katsuya Ito
Katsuya Ito's research interests include development economics and transition economies.