Grants, Remittances, and the Equilibrium Real Exchange Rate in Sub-Saharan African Countries
IMF Working Papers, April 1, 2009
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- Grants, Remittances, and the Equilibrium Real Exchange Rate in Sub-Saharan African Countries
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Bibliographic details
- Authors: Joannes Mongardini, Brett Rayner
- Published: April 1, 2009
- Series: IMF Working Papers
Methodology
- Builds on the methodology developed by Chudik and Mongardini (2007).
- Uses panel techniques to estimate the relationship between grants and remittances and the equilibrium real exchange rate in Sub-Saharan African (SSA) countries.
Main findings
- Grants and remittances are not associated, in the long run, with an appreciation of the real effective exchange rate in SSA.
- Grants and remittances are therefore not likely to give rise to Dutch disease effects.
Interpretation and policy implications
- Findings suggest that grants and remittances may be serving to ease supply constraints or boost productivity in the non-tradable sector in the recipient economies.
- Implication: inflows from grants and remittances need not be presumed to have adverse real exchange rate appreciation effects that harm tradable sectors in SSA.