Are Workers' Remittances a Hedge Against Macroeconomic Shocks? the Case of Sri Lanka

Author/Editor:

Erik Lueth ; Marta Ruiz-Arranz

Publication Date:

February 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We estimate a vector error correction (VEC) model for Sri Lanka to determine the response of remittance receipts to macroeconomic shocks. This is the first attempt of its kind in the literature. We find that remittance receipts are procyclical and decline when the island's currency weakens, undermining their usefulness as shock absorber. On the other hand, remittances increase in response to oil price shocks, reflecting the fact that most overseas. Sri Lankan are employed in the Gulf states. The procyclicality of remittances calls into question the notion that remittances are largely motivated by altruism.

Series:

Working Paper No. 07/22

Subject:

English

Publication Date:

February 1, 2007

ISBN/ISSN:

9781451865868/1018-5941

Stock No:

WPIEA2007022

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

14

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