2018年-世界发展银行全球_The_Effect_of_Remittances_on_the_Current_Account_in_Developing_and_Emerging_Economies_26页_790kb

Summary of "The Effect of Remittances on the Current Account in Developing and Emerging Economies"

Core Content

This paper investigates the impact of remittances on the current account in developing and emerging economies, with a particular focus on how exchange rate regimes influence this relationship. It highlights the dual nature of remittances: while they can improve the current account in the short run, their long-term effects may be negative, suggesting potential macroeconomic imbalances. The study also examines the role of exchange rate flexibility in mitigating or exacerbating these effects.

Main Findings

• Contemporaneous Effect: Remittances have a positive effect on the current account in the short term, as they provide additional foreign income that can be used to finance trade deficits or support domestic investment.
• Lagged Effect: The lagged impact of remittances on the current account is negative, indicating that the benefits may be short-lived and that remittances could lead to resource reallocation from tradable to non-tradable sectors, potentially triggering the Dutch disease phenomenon.
• Exchange Rate Regimes: More flexible exchange rate regimes tend to dampen the positive contemporaneous effect of remittances on the current account, suggesting that exchange rate policy plays a crucial role in managing the macroeconomic consequences of remittances.

Key Information

• Magnitude of Remittances: Remittances to developing countries reached $431.6 billion in 2015, making them a significant component of international financial flows, more than three times the size of official development assistance.
• Dutch Disease: The paper discusses how remittances can lead to real exchange rate appreciation, loss of international competitiveness, and resource reallocation, which can negatively affect economic growth.
• Empirical Analysis: The study uses panel data from 1970 to 2014 for a group of developing and transition countries, incorporating variables such as remittances as a percentage of GDP, exchange rate regimes, investment, government spending, and savings.
• Model Specifications:
  • A static panel model with fixed effects and a dynamic panel model using GMM system estimator are employed to analyze the relationship.
  • The interaction term between remittances and exchange rate regimes is introduced to assess how flexibility affects the impact of remittances on the current account.

Data and Methodology

• Data Sources:
  • Exchange rate regimes are classified using the Reinhart and Rogoff COARSE classification.
  • Current account data is from UNCTADStat, and remittances are from World Bank's WDI.
  • Control variables include GDP per capita, real exchange rate, savings, investment, government spending, eurodollar deposit rate, and OECD GDP as a proxy for global economic conditions.
• Robustness Checks:
  • The study excludes outliers for GDP per capita and remittances to test the robustness of the results.
  • Variant control variables such as relative GDP, net exports, and net foreign assets are introduced to confirm the findings.
  • The analysis also accounts for cross-sectional dependence in the error terms.

Quantitative Implications

• A 1% increase in remittances as a percentage of GDP leads to a 0.6 to 1.1% improvement in the current account balance contemporaneously.
• However, with increased exchange rate flexibility, this positive effect is reduced by 0.2 to 0.3%.
• When considering the nonlinear combination of remittances and the interaction term, the dampening effect of exchange rate flexibility on the positive impact of remittances is estimated to be around 0.2%.

Discussion of Results

• The positive contemporaneous effect of remittances aligns with the idea that they can support current account sustainability.
• The negative lagged effect suggests that remittances may lead to resource misallocation and real appreciation, which can reduce export competitiveness.
• Exchange rate flexibility is shown to reduce the positive impact of remittances, likely due to the real exchange rate appreciation and increased import demand.
• The study supports the Dutch disease hypothesis, indicating that remittances can have undesirable long-term effects on the current account.

Conclusion

• Policy makers face trade-offs in using exchange rate policy to manage the effects of remittances on the current account.
• While exchange rate flexibility may help in dealing with long-term macroeconomic imbalances like the Dutch disease, it can also dampen the immediate positive impact of remittances.
• Limiting exchange rate flexibility could lead to currency overvaluation, potentially triggering sharp depreciation and current account decline, which may have disastrous consequences for the economy.

Policy Implications

• The findings suggest that exchange rate policy should be carefully considered when managing the macroeconomic effects of remittances.
• Flexible exchange rate regimes may be more effective in mitigating the adverse long-term effects of remittances, particularly the Dutch disease.
• Policymakers need to balance the short-term benefits of remittances with the long-term risks they pose to the current account and overall economic stability.

References

• Acosta, P., Calderón, C., Fajnzylber, P., and López, H. (2008). “What is the Impact of International Migrant Remittances on Poverty and Inequality in Latin America?” World Development 36(1), 89-114.
• Acosta, P., Lartey, E.K.K., and Mandelman, F. (2009). "Remittances and Dutch Disease." Journal of International Economics 79, 102-116.
• Adams, R. and J. Page (2005). “Do International Migration and Remittances Reduce Poverty in Developing Countries?” World Development 33 (10), 1645–1669.
• Amuedo-Dorantes, C. and Pozo S. (2004). "Workers' Remittances and the Real Exchange Rate: A Paradox of Gifts." World Development 32 (8), 1407-1417.
• Bugamelli, M., and Paterno F. (2009), “Do workers’ remittances reduce the probability of current account reversals?” World Development 37:12, 1821-1838.
• Calderon, C., Alberto Chong and Norman Loayza (2002), “Determinants of Current Account Deficits in Developing Countries”, The B.E. Journal of Macroeconomics, 2:1, 1-33.
• Chinn, Menzie D. and Eswar S. Prasad, (2000), “Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration”, NBER Working Paper No. 7581.
• Edwards, S. (2004). Financial openness, sudden stops and current account reversals. American Economic Review, 94(2), 59-64.
• Frankenberg, E., Smith, J. P., & Thomas, D. (2003). Economics shocks, wealth and welfare. The Journal of Human Resources, 38(2) 280-321.
• Hassan, G. and Holmes, M. (2014)