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

WPIEA2007022 Image
Price:  $18.00

Author/Editor: Erik Lueth, Marta Ruiz-Arranz
Release Date: © February, 2007
ISBN : 978-1-45186-586-8
Stock #: WPIEA2007022
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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.


Business cycles , Economic development

More publications in this series: Working Papers

More publications by: Erik Lueth ; Marta Ruiz-Arranz