Remittances and exchange rate - Empirical evidence from emerging economies

Abstract

The exchange rate plays an important role to trade, investment and macroeconomic risks of open economies. There are many factors that affect the exchange rate such as inflation, interest rates, balance of payments where remittance flows receive more and more attention of economists due to their increase in their values, particularly in emerging economies. This study uses data from 21 countries which are classified as emerging markets in the period between 2001 and 2013 to investigate the impacts of remittances on exchange rate. Through panel data estimations, we found that remittances increase the value of the local currencies, which is not altered by the 2008 global financial crisis.