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Wednesday, April 4, 2012

Higher inflation, higher remittances: Anti-economics?

A study coordinated by Dr. Ahsan Mansur (Executive Director, Policy Research Institute) and conducted by Nurnaher Begum Rama (Joint Director, Bangladesh Bank) and Rani Sutradhar  (Assistant Director, Bangladesh Bank) found that higher inflation in Bangladesh actually helps remittance inflows into the country. As the study says, higher inflation at home relative to host country reduces the purchasing power of migrants’ family, induces migrants to send more remittances.

One can find the original working paper in the Bangladesh Bank website.

Here is the link of the news.

Comments: Though the study included both exchange rate and number of overseas jobs for Bangladeshi workers as explanatory variables, but it didn't find these variables significant in explaining remittance inflows into Bangladesh. But inflation variable was highly significant; even its t-ratio is higher than that of all other variables including GDP of 6 host countries. What do exactly these mean? What do policymakers get from this exercise of Bangladesh Bank, except wait-and-see for the increase in income in host countries and rise in domestic inflation? Anti-economics?

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