The overcoming other conventional sources of capital,

inflow of remittances has become an important source of external financing in
developing countries, overcoming other conventional sources of capital, in particular
aid and portfolio investment. It is estimated that remittances to the MENA will
grow by 2.9 percent in 2018. (migration and remittances, 2017). Although it is
generally accepted that remittances are an important means of improving the
living conditions of families of the poorest countries in the world, there is
disagreement on the evaluation of their macroeconomic effects.

remittances have welfare and growth effect. There is a concern whether remittances
result in an appreciation of the real exchange rate (RER), Which could cause
Dutch disease. The massive inflow of remittances could be associated with real
exchange rate appreciation and loss of international competitiveness (Barrett 2013).

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The role of remittances is well recognised and there is an
increasing volume of research in that regard. Not only is this recognised at
the research level, the issue of remittances as a developmental tool, as well
as its potential negative consequences, has engaged policy makers and the
attention of major financial institutions such as the World Bank and IMF (see
for instance IMF’s World Economic Outlook 2005 and the World Bank’s Global
Economic Prospects 2006).


empirical studies have been conducted to study the relationship between
remittances and economic growth. However, only few studied the relationship
between remittances and exchange rate, and almost no study has looked so far at
this kind of econometrical relationship for the remittances and exchange rate
in Morocco. The effects of remittances on the exchange rate raise an important
area for research and the exploration of the relationship between remittances
and the real exchange rate more closely, and that was the main motivation behind
writing this research especially in a Moroccan context.


Various studies
have reported mixes effects of remittances on the real exchange rate. For
instance, Amuedo-Dorantes
and Pozo (2004), Molina and Bussolo (2007), Acosta, Lartey and Mandelman
(2008), Acosta, Baerg and Mandelman (2009), Barajas et al. (2010), Combes,
Kinda and Plane (2011), Lartey, Mandelman and Acosta (2012), and Hassan and
Holmes (2012)
discovered that huge remittances led to appreciation of Tajikistan’s real
exchange rate whereas Barrett (2014) and  Izquierdo and Montiel (2006)on the
contrary found that remittances depreciate the Jamaica’s real exchange rate.  (Rahman and Mustafa, 2010) found that exchange
rate and remittances seem correlated with no causal connection.

 Ball et al. (2013)
analyze the short-run dynamics triggered by an increase in remittances under
different exchange rate regimes, with a focus on the monetary nature of
remittances. The theoretical predictions indicate that under a fixed exchange
rate regime, a rise in remittances leads to an increase in GDP, increase in the
rate of inflation and an appreciation of the real exchange rate, while under a
flexible exchange rate regime they generate an increase in GDP, an appreciation
of the real exchange rate, but a decrease in inflation rate.


is the third largest remittances receiver in the MENA region and due to robust
growth in the euro area, we also expect remittances to Maghreb countries, which
receive the bulk of their remittances from Europe. In Morocco, the dollar value
of remittances declined by 11 percent in the first three quarters of 2015,
whereas remittances grew by 4.5 percent in Moroccan dirham (world Bank 2017). At
the same time, arrivals in Spain coming from Morocco through August 2017 have
tripled compared to the same period last year, according to the International Organization
for Migration (IOM) (world Bank 2017).


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