Abstract
This paper studies the effects of real effective exchange rate and trade openness on expatriates’ remittances inflows to Bangladesh. Annual data from 1975 through 2014 are employed. Efficient unit root tests, linear ARDL bounds testing and VECM are implemented. All variables are nonstationary in log-levels with I(1) behavior. The evidence on cointegration among the variables is inconclusive. The estimates of VECM reveal moderate pace of convergence toward long-run equilibrium with mixed evidence on short-run interactive feedback effects. Remittances are much more responsive to changes in real effective exchange rate and trade openness in the long run than in the short run. For policy implications, Bangladesh should focus on enticing more remittances and pursue trade liberalization policies for spurring long-term economic growth. Bangladesh should also periodically adjust real effective exchange rate for export promotion, in particular. However, Bangladesh should use caution for not moving too fast in pursuing these policies in order not to be unduly vulnerable to external negative shocks.
Recommended Citation
Islam, Anisul and Rahman, Matiur Dr
(2022)
"EFFECTS OF REAL EFFECTIVE EXCHANGE RATE AND TRADE OPENNESS ON REMITTANCES: EVIDENCE FOR BANGLADESH,"
Pennsylvania Economic Review: Vol. 29:
No.
2, Article 5.
DOI: https://doi.org/10.65193/3067-8080.1046