Remittances, Dutch Disease, and Competitiveness - A Bayesian Analysis

We look for symptoms of Dutch disease in the Pakistani economy arising from international remittances. The presence of endogeneity and uncertainty in our model due to the managed float of Pakistani Rupee prevalent during most of the studied period requires the use of a probabilistic rather than a standard frequentist technique. Therefore, we carry out an IV Bayesian analysis using the Gibbs algorithm. We find evidence for both spending and resource movement effects, both of them in the short as well as the long-run. Remittances cause an appreciation of the real exchange rate and loss of compet... Mehr ...