Workers' Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence.

The article analyzes the effect of worker remittances (WR) on the equilibrium real exchange rate (ERER) in recipient countries. It shows that in many countries, WR arrests official development assistance and private capital flows, which could cause macroeconomic problems by raising ERER. One conclusion drawn is that Dutch disease problems may not be a necessary side effect of remittance inflows, which are said to be larger in Asia and Latin America than in Africa and eastern Europe, mainly because countries such as India and Mexico receive more WR.