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Are Workers' Remittances a Hedge Against Macroeconomic Shocks? the Case of Sri Lanka
Author:
Marta Ruiz-Arranz
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Mr. Erik Lueth
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Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 022
Language:
English
Publication Date:
01 Feb 2007
DOI:
https://doi.org/10.5089/9781451865868.001
ISBN:
9781451865868
ISSN:
1018-5941
Pages:
14
Keywords:
WP; remittance; remittance receipt; GDP; exchange rate; Workers’ remittances; Cyclicality; Macroeconomic Shock; Vector Error Correction Model; remittance flow; remittance datum; remittances to Sri Lanka; remittances amount; remittances to a CPI shock; Remittances; Outward remittances; Oil prices; Inward remittances; Exchange rates; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We estimate a vector error correction (VEC) model for Sri Lanka to determine the response of remittance receipts to macroeconomic shocks. This is the first attempt of its kind in the literature. We find that remittance receipts are procyclical and decline when the island's currency weakens, undermining their usefulness as shock absorber. On the other hand, remittances increase in response to oil price shocks, reflecting the fact that most overseas. Sri Lankan are employed in the Gulf states. The procyclicality of remittances calls into question the notion that remittances are largely motivated by altruism.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2007: Issue 022