Abstract
Government to government transfers are treated understandably as exogenous in open economy macro models. Even private transfer like remittances are treated as exogenous in the extant literature. In this paper we examine the effects of endogenous private transfer (remittances) on the real exchange rates using a dynamic two-sector dependent economy model. We examine the effects of demand and supply shocks and found that the dynamic patterns for real exchange rates depends on endogeneity of the transfer and the factor intensity of the traded and non-traded sectors.
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