Are Workers' Remittances a Hedge Against Macroeconomic Shocks? the Case of Sri Lanka
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Summary:
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.
Series:
Working Paper No. 2007/022
Subject:
Balance of payments Exchange rates Foreign exchange Inward remittances Oil prices Outward remittances Prices Remittances
English
Publication Date:
February 1, 2007
ISBN/ISSN:
9781451865868/1018-5941
Stock No:
WPIEA2007022
Pages:
14
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