Based on the Salter-Swan-Corden-Dornbusch framework, which argues that capital inflows may appreciate the official exchange rate by aggravating the effects of any previously existing domestic distortions, this paper examines the claim that workers' remittances cause the Dutch disease in sub-Saharan Africa (SSA). Specifically, the study investigates whether remittances cause financial overheating and spending effects. The study adopts the dynamic panel instrumental variable system generalized method of moment (IVSGMM). This study finds that although workers' remittances cause financial overheating, they neither increase general spending nor appreciate the real exchange rate, thereby implying that workers' remittances do not cause the Dutch disease in SSA from 1996 to 2013. These findings suggest that governments should establish diaspora incentive schemes so as to encourage remitters and recipient households' to invest productively. Government efforts should be integral at improving the financial education for remitters and the recipient households so as to avoiding channelling overheating effects to spending effects and to the Dutch disease.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
customersupport@researchsolutions.com
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.