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

16 Pages Posted: 7 Feb 2007

See all articles by Erik Lueth

Erik Lueth

International Monetary Fund (IMF)

Marta Ruiz-Arranz

International Monetary Fund (IMF)

Date Written: February 2007

Abstract

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.

JEL Classification: F29, J61, O11, O24, C22

Suggested Citation

Lueth, Erik and Ruiz-Arranz, Marta, Are Workers' Remittances a Hedge Against Macroeconomic Shocks? The Case of Sri Lanka (February 2007). IMF Working Paper No. 07/22, Available at SSRN: https://ssrn.com/abstract=961752

Erik Lueth (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Marta Ruiz-Arranz

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
176
Abstract Views
1,310
rank
201,908
PlumX Metrics