TY  - JOUR
AB  - Purpose In this paper, the authors develop and estimate a small open economy dynamic stochastic general equilibrium (DSGE) model with an enriched micro-founded specification to account for foreign remittances, an important source that helps bridge the trade gap in many developing and emerging market economies.Design/methodology/approach Although the authors’ specification provides a general frame for the analysis of the role of workers' remittances, they motivate and calibrate the model with specific focus on Pakistan, where most of the trade deficit is met through the remittance channel.Findings The results indicate that a negative shock to workers' remittances hampers real growth via decreased consumption and imported investment goods, while it builds pressure on exchange rate and hence worsens current account balance. These results indicate that too much dependence on workers' remittances to help meet foreign exchange deficits may potentially leave the economy in doldrums in case sizable negative shocks occur to the flow of foreign remittances.Originality/value The authors develop and estimate a small open economy DSGE model with an enriched micro-founded specification to account for foreign remittances, an important source that helps bridge the trade gap in many developing and emerging market economies.
VL  - 47
IS  - 6
SN  - 0144-3585
DO  - 10.1108/JES-01-2019-0009
UR  - https://doi.org/10.1108/JES-01-2019-0009
AU  - Rehman Muhammad
AU  - Khan Sajawal
AU  - Hayat Zafar
AU  - Balli Faruk
PY  - 2020
Y1  - 2020/01/01
TI  - A small open economy DSGE model with workers' remittances
T2  - Journal of Economic Studies
PB  - Emerald Publishing Limited
SP  - 1339
EP  - 1361
Y2  - 2024/05/10
ER  -