Iranian Economic Review

Iranian Economic Review

Does Remittances Inflow in India Have Dutch Disease Effects? ARDL Cointegration Approach

Document Type : Research Paper

Authors
Manisha Das
Deb Kumar Chakraborty
Department of Economics, Dibrugarh University, Dibrugarh, Assam, India
10.22059/ier.2024.339546.1007393
Abstract
Remittances are a great source of foreign exchange earnings for India as the country receives the highest amount of these inflows among other countries in the world. These inflows as they constitute a major part of the country’s external inflows may have important implications on the macroeconomic variables of the country. In this paper, the main objective is to study the Dutch disease impact of remittances in the Indian economy. The Autoregressive Distributed Lag (ARDL) model is used for analyzing the Dutch disease impact of remittances using time series data from 1980-2019. The findings reveal that remittances do have a Dutch disease impact on the country by appreciating the real exchange rate and through contraction of the manufacturing sector of the country. The paper suggests that utilizing remittances in productive investment rather than on consumption can counter the side effects of remittances and will induce growth of both tradable and non-tradable sectors of the country.
Keywords
Autoregressive Distributed Lag
Export Competitiveness
Foreign Inflows
Real Exchange Rate
Time Series
Subjects
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Iranian Economic Review
Volume 28, Issue 1
Spring 2024
Pages 49-77