Description
Remittances received from workers working abroad have grown at a rapid pace over the last three decades in South Asia. In U.S. dollar terms, remittances as a percentage of GDP during the last ten years, for example, have risen in all countries but more dramatically in Nepal, Bangladesh and Pakistan. Phenomenal growth of remittances in Nepal during 2000s has raised their share in GDP to about 22 percent in 2010. Sri Lanka has always enjoyed relatively large remittances, as a proportion of GDP. Finally, India remains the largest recipient of remittances in the world in monetary terms, but because of its rapid growth in GDP, its remittances show only a modest rise relative to GDP. It is thus apparent that remittances (and similarly other types of inflows of foreign money) will have an effect on both inflation and the real exchange rate of the home currency. We explore these dual effects of remittances in South Asian economies.
Effects of Remittances on Inflation and Real Exchange Rate in South Asia
Remittances received from workers working abroad have grown at a rapid pace over the last three decades in South Asia. In U.S. dollar terms, remittances as a percentage of GDP during the last ten years, for example, have risen in all countries but more dramatically in Nepal, Bangladesh and Pakistan. Phenomenal growth of remittances in Nepal during 2000s has raised their share in GDP to about 22 percent in 2010. Sri Lanka has always enjoyed relatively large remittances, as a proportion of GDP. Finally, India remains the largest recipient of remittances in the world in monetary terms, but because of its rapid growth in GDP, its remittances show only a modest rise relative to GDP. It is thus apparent that remittances (and similarly other types of inflows of foreign money) will have an effect on both inflation and the real exchange rate of the home currency. We explore these dual effects of remittances in South Asian economies.