Author： Amuedo-Dorantes Catalina Pozo Susan Vargas-Silva Carlos
Publisher： Routledge Ltd
ISSN： 0022-0388
Source： Journal of Development Studies, Vol.46, Iss.5, 2010-05, pp. : 941-960
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Abstract
We examine how remittances relate to the exchange rate, natural disasters and foreign aid focusing on Small Island Developing States (SIDS). Using panel VAR methods, we are able to compensate for both data limitations and endogeneity issues. While remittances respond to innovations in the macroeconomic variables included in the analysis, remittances also have important impacts on these variables. Furthermore, the impact of remittances differs in SIDS economies relative to the set of all developing economies. Remittances appear to depreciate the real exchange in SIDS economies, whereas they appreciate the real exchange rate when a broader sample of economies is considered.
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