Remittances and Real Exchange Rate: Latest Evidence from Cochrane Orcutt Econometric Model
Remittances and Real Exchange Rate: Latest Evidence from Cochrane Orcutt Econometric Model

Summary/Abstract: We examine the impact of remittances on the real exchange rate in South-Africa using Cochrane-Orcutt Ordinary Least Square. The study finds out that remittances do not show any relationship with Rand in the foreign exchange market but certain factors like income, gross fixed capital formation and trade are significant to explain the dynamics in foreign exchange rate of South-African currency. The study suggests domestication of the excessive desire for western products, and provision of necessary incentives for local substitute companies to curb negative impact of trade on the foreign exchange rate. The study is constrained in so many ways, but one important area future research will like to investigate is how underground remittances operates to influence the dynamics in the real exchange rate.

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