Year: 2025
Type: article
Abstract: This study investigates the effect of exchange rate volatility on remittance inflows to Egypt during the period 2000–2023. It aims to determine whether currency fluctuations discourage remittances and how such volatility affects the volume and stability of remittance flows. The research employs the Autoregressive Distributed Lag (ARDL) model to analyze both short-run and long-run relationships between remittance inflows and key macroeconomic variables. Exchange rate volatility is measured using a three-year rolling standard deviation to capture persistent fluctuations. Inflation and GDP growth are included as control variables. The findings reveal a significant positive effect of exchange rate volatility on remittance inflows in the long run, suggesting that migrants send more money home when currency depreciation occurs. In the short run, the second lag of exchange rate volatility is also significant and positive, reflecting sensitivity to recent currency movements. Inflation and GDP growth are statistically insignificant in the long term, while the second lag of GDP growth shows a significant positive short-run effect. These results offer insights for policymakers on how remittance behavior is shaped by exchange rate dynamics. Recognizing the incentive effect of moderate depreciation can help guide foreign exchange and diaspora engagement policies, while extreme volatility should be managed to avoid shifts toward informal remittance channels. In the long term, moderate exchange rate volatility can boost remittance inflows by enhancing the purchasing power of funds sent home. However, in the short term, excessive volatility may create uncertainty, causing migrants to delay or reroute remittances. The study emphasizes the importance of exchange rate stability in sustaining formal remittance flows and supporting economic resilience in Egypt.
Source: The Business & Management Review
Institution: Future University in Egypt
Language: English
Topic: Migration and Labor Dynamics
Subfield: Sociology and Political Science
Field: Social Sciences
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4414654187
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