Analyzing ofw remittances: The determinants and their implications on the movement of exchange rates

• Main Authors: Ang, Jan Rizza D., Tan, Maisie C., Sophia, Manelle M.
• Format: text
• Language: English
• Published: Animo Repository 2013
• Subjects: Migrant remittances; Emigrant remittances; Economics
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/11232
• Institution: De La Salle University

Over the past two decades, OFW remittances have diversified and grown, improving income distribution, easing unemploymet as well as contributing to the country's balance of payments. This paper uses estimated data on remittances to eliminate biases present in Bangko Sentral ng Pilipinas data. Utilizing 1980 to 2011 historical and estimated time series data, a macroeconomic analysis is employed to firstly deliberate whether host country CPI, GDP growth, real interest rate differential, and growth in migrant stocks impact the remittances received by the Philippines from five of the top remitting countries: US, Canada, Japan, Australia and Italy. This study additionally claims home country FDI, net exports, GDP growth and remittances to play a vital role in the Philippine exchange rate movements. Ordinary Least Squares regression results exhibit varied relationships on remittance flows for each host country. CPI is found to have a negative impact for Australia, where cost of living is highest. Conversely, RIRD demonstrates a positive influence for investment-driven country Japan, but not in countries where migrants intend to permanently dwell. External debt is also found to be positive for Italy and Australia, where financing are required to boost competitiveness. Moreover, found to consistently display a highly significant and positive effect for all five host countries is the growth in migrant stocks. Remittance receipts from each host country, Philippine FDI and net exports also bear influence on the movement of exchange rates. These findings validate that policymakers may encourage greater remittances through formal channels, making arrangements to induce more remittance-sending activities and considering the OFWs' destination and timing of departure. Moreover, exchange rate movements may be influenced through the improvement of the country's trade balance and degree openness.