REMITTANCES AND THE DUTCH DISEASE IN SUB-SAHARAN AFRICA: A DYNAMIC PANEL APPROACH

Emmanuel Owusu-Sekyere (), Renee van Eyden () and Francis Kemegue
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Emmanuel Owusu-Sekyere: Department of Economics, University of Pretoria
Francis Kemegue: Department of Economics, University of Pretoria

No 201129, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper investigates the effect of remittance inflows on the real exchange rate in Sub-Saharan Africa (SSA) using annual data from 1980 to 2008 for 34 SSA countries, generalised method of moments by Arellano and Bover (1995) and feasible generalised least squares by Parks (1967) and Kmenta (1971, 1986). We find that when cross-sectional dependence and individual effects are controlled for, remittances to SSA as a whole appreciate the underlying real exchange rate of recipient countries. However the Dutch-disease effect is not experienced via the loss of export competitiveness, because the exchange rate appreciation is mitigated by monetary policy positioning and overdependence on imports due to low levels of domestic production in these countries. We also find reverse causality between remittances and the real exchange rate.

Keywords: Dutch disease; remittances; real exchange rate; Sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: C33 F24 F31 O55 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2011-11
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Citations: View citations in EconPapers (2)

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http://www.up.ac.za/media/shared/61/WP/wp259.zp39557.pdf (application/pdf)

Related works:
Journal Article: Remittances and the Dutch Disease in Sub-Saharan Africa: A Dynamic Panel Approach (2014)
Working Paper: Remittances and the Dutch disease in Sub-Saharan Africa. A Dynamic Panel Approach (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201129

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