Exchange rates and immigration policy

Adrian J Shin

doi:10.1186/s40878-021-00228-2

Abstract

What explains cross-national and temporal variations in migrant rights? This article argues that policymakers implement more exclusionary or inclusive policies toward migrants in response to exchange-rate fluctuations. Since exchange rates affect the real value of remittances, exchange-rate depreciation of the host state’s currency makes migration less valuable for existing and potential migrants, while exchange-rate appreciation increases the degree of migrant pressure on the host state by doing the opposite. This well-documented relationship between exchange rate valuation and migration movements affects how host country governments craft immigration policy. Under exchange-rate depreciation, policymakers will implement more inclusive policies to deter the “exit” of migrants and maintain a stable supply of labor. Under exchange-rate appreciation, increased migration pressures heighten public anxiety over immigration in the host country, in turn causing policymakers to restrict further immigration by implementing more exclusionary policies. Consistent with the argument, the empirical results show that the purchasing-power-parity (PPP) currency values of migrants’ home countries are positively correlated with more pro-migrant policies in host countries.

Highlights

As of 2017, the number of international migrants is estimated to be 258 million or roughly 3.4% of the world population
The results indicate no evidence of a correlation between real effective exchange rate (REER) and the dependent variable
The argument of this article relies on the assumption that migrants send remittances to their home countries. This assumption may not be plausible for immigrants who have settled permanently in host states and immigrants who have become citizens

Summary

Introduction

As of 2017, the number of international migrants is estimated to be 258 million or roughly 3.4% of the world population. Combined with more inclusive social and cultural rights, these “integration” policies increase the likelihood that migrants remain in host states (Ortega and Peri 2013; Fitzgerald et al 2014; Alarian and Goodman 2017), and eventually reduce their dependence on remittances and their sensitivity to exchange-rate fluctuations. The results support that the host state’s treatment of immigration depends on the exchange rate of that country relative to its largest migrant-sending countries.

Results

Conclusion