Remittances, Dutch Disease, and Competitiveness: a Bayesian Analysis

Farid Makhlouf (1) , Mazhar Mughal (1)

1 CATT - Centre d'Analyse Théorique et de Traitement des données économiques

The paper studies symptoms of Dutch disease in the Pakistani economy arising from international remittances. An IV Bayesian analysis is carried out to take care of the endogeneity and uncertainty due to the managed float of Pakistani Rupee. We find evidence for both spending and resource movement effects in both the short and the long-run. These impacts are stronger and different from those the Official Development Assistance and the FDI exert. We find that while aggregate remittances and the remittances from Persian Gulf contribute to the Dutch disease in Pakistan, those from North America and Europe do not.

Keywords: Remittance; Real Exchange Rate; Dutch Disease; Competitiveness; Bayesian Analysis; Pakistan

Domains: Economics and Finance

Farid Makhlouf, Mazhar Mughal. Remittances, Dutch Disease, and Competitiveness: a Bayesian Analysis. Journal of Economic Development, 2013, 38 (2), pp.67-97. ⟨hal-01885290⟩