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

Document Type : Research Paper

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Department of Economics, Dibrugarh University, Dibrugarh, Assam, India

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. 

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Iranian Economic Review
Volume 28, Issue 1
April 2024
Pages 49-77

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