Relative impact of remittances on the fluctuations of the components of the real exchange rate

• Main Authors: Esporlas, Carlo Antonio, Lu, Jing Wen, Pangilinan, Millicent Joyce, Villacampa, Krista Camille
• Format: text
• Language: English
• Published: Animo Repository 2010
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/14765
• Institution: De La Salle University

According to Acosta, Baerg, and Mandelman (2009) the effects of remittances in the fluctuation of exchange rate states that when the level of remittances rises there will be an increase in the spending of the receiving families of the migrants leading to the appreciation of the real exchange rate furthermore, resource reallocation effects-wherein there is a shift from consumption of tradable goods to non-tradable goods-will result to the occurrence of tradable of Dutch Disease. To further intensity these findings, this study determined the relative impact of remittances to the components of the real exchange rate and which of these two is more responsive to remittances. The researchers used Time-Series Regression Model with 1-month lag and 2-month lag to generate the answers to the problem. The findings led to the conclusion that with 1-month lag the initial effect of remittances is inflationary which may lead to the increase in prices of goods and services which may be the cause of the significant appreciation of the nominal exchange rate with the 2-month lag.