Migrants’ remittances and Dutch disease: evidence from Egypt

Abstract

As a result of the inflow of foreign currency into an economy, an appreciation of the currency of the recipient country will occur.This paper aims to study the Dutch Disease and its relation with Migrants' remittances in Egypt using the ARDL model in the short run and long run using the error correction model. The data covers the period from 1980 to 2020 in Egypt by examining some variables as such migrants' remittances, real effective exchange rate, trade openness, and interest rates. The results show the significance of migrants' remittances on the real effective exchange rate (REER) only in the long run. Thus there is a negative relation between REER and these remittances and a positive relationship with real GDP per capita. This confirms the existence of the short-run and long-run relationship between them and the existence of Dutch disease in Egypt. Although there are relationships between REER and other variables, remittances are significant only in the short run rather than in the long run.