Abstract
This paper analyzes the dynamic absorption of remittances at the macroeconomic level, contrasting two possible effects on economic activity, depending on whether these accrue to hand-to-mouth wage earners or credit-constrained entrepreneurs. Using an open economy DSGE model with heterogeneous households, we show that the effects of remittances are inherently contractionary if they accrue to the first group, and expansionary when they accrue to the second group. Calibrating the model to the Philippines using both aggregate data as well as micro-evidence from the Family Income and Expenditure Survey (FIES), we show that accounting for both binding credit constraints and the internal distribution of remittances improves the model's fit to the data. Welfare gains result when the distribution of remittances is skewed towards entrepreneurs.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
