Download Kireyev_Eng - AlexeiKireyev.com

Денежные переводы, реальный
эффективный валютный курс и
денежно-кредитная политика
Remittances, Real Effective Exchange, and Monetary Policy
Alexei Kireyev, IMF
Roadmap
1. Macroeconomics of remittances
2. The impact on REER
3. Monetary policy response
4. International experience
5. Conclusions
1. Remittances differ from other types
of inflows, in particular aid
Remittances
Official aid
Directed to
the private
sector
Directed to
the public
sector
Consumed or
saved
Consumed
and not saved
Spent on
tradables and
nontradables
Spent mainly
on
nontradables
Relatively
stable
May be
volatile
Procyclical
with short lag
Procyclical
with a longer
lag (1-2 years)
Remittances and the aggregate demand
Current account (CAB)
Y=(C+I)p+(C+I)g+(X-M+NY+NCT)
Income
Private sector
balance
Public sector
balance
Trade balance
Remittances are
included in factor
income (NY) and net
current transfers
(NCT). Call
remittances R, other
things being equal
Macroeconomic implications of
remittances depend on
• Their use: consumption, saving or investment
• Their size relative to other balance of payment
flows
• Degree of their volatility
• Their persistency: shock or a constant flow.
Impact of remittances on money
supply and exchange rate
Remittances
Consumed
Nontradeables
Invested
Saved
Tradeables
Importables
Case 2
in banks
outside banks
Exportables
Tradeables
Exportables
Case 1
Nontradeables
Importables
Case 3
Case 1. Remittances saved
Remittances
saved
in banks
in foreign
currency
outside banks
in local currency
increase in
money supply
increase in
money supply
no impact on
exchange rate
upward pressure
on exchange
rate
in foreign
currency
no impact on
money supply
no impact on
exchange rate
in local currency
no impact on
money supply
upward pressure
on exchange
rate
Case 2. Remittances spent on consumption
Remittances
spent on
imported goods
and services
in foreign
currency
local goods and
services
in local currency
in foreign
currency
no impact on
money supply
increase in
money supply
no impact on
recorded money
supply
no impact on
exchange rate
upward pressure
on exchange rate
upward pressure
on exchange rate
Case 3. Remittances invested
Remittances
spent on
investment
abroad
in foreign
currency
at home
in foreign
currency
in local currency
no impact on
money supply
increase in
money supply
no impact on
recorded money
supply
no impact on
exchange rate
upward pressure
on exchange rate
no impact on
exchange rate
The overall macro impact is mixed
• No impact on money supply if saved outside banks;
spent on imports or invested abroad
• Increase in money supply if saved in banks in local or
foreign currency; spent on consumption in local
currency.
• No impact on the exchange rate if saved in banks and
outside banks in foreign currency; sent on imports,
invested abroad or locally in foreign currency
• Upward pressure on the exchange rate if saved in local
currency in banks and outside banks; spent on
consumption of local goods and services; and invested
at home in local currency
2. Real effective exchange rate
REER
Inflation
Nominal exchange
rate
fixed
(differential)
flexible
No impact appreciation
tradable goods
no impact
non-tradable goods
price
increase
Channels for REER appreciation
• Under a fixed exchange rate regime: inflation
in non-traded goods and services
• Under a flexible exchange rate regime:
nominal exchange rate appreciation and some
inflation in non-traded goods and services.
Volatility of remittances
Remittances
Permanent flow
Shock
Temporarily
appreciated REER,
above the equilibrium
level
Negative impact on
competitiveness
Permanently higher
equilibrium REER
No impact on the
long-run
competitiveness
3. Monetary policy response
Capital controls
Effective
monetary policy
Fixed exchange
rate
Trilemma
Ineffective
monetary policy
Capital mobility
Flexible
exchange rate
Constraints for monetary policy response
to remittances
Exchange rate
regime
Flexible
Fixed
Capital controls
Short-term
monetary policy
response possible
No capital
controls
Monetary policy
response is not
possible
Capital controls
No capital controls
Monetary policy
response is possible
and highly efficient
Monetary policy
response is possible
but less efficient
Options for monetary policy in case of
REER appreciation
In case of a shock from remittances and a disruptive REER
appreciation
• resist nominal appreciation: intervene by purchasing foreign
exchange to reserves
• resist inflation in non-tradables:
– sterilize money supply by selling securities
– increase reserve requirements, part in foreign exchange
– raise policy interest rates
In case of a permanent flow of remittances and an orderly REER
appreciation
• do not intervene against fundamental trends
• smooth extreme volatility of the nominal exchange rate by twosided interventions
• allow the nominal exchange rate adjust
Shortcomings of an active monetary
policies in response to REER appreciation
• Sterilization increases interest rates and
therefore attacks addition foreign capital and
accelerated REER appreciation
• High interest rates and tight liquidity deprive
the economy of the benefits of remittances
inflow by hampering investment and growth
• Sterilization can be costly to the Central Bank
and discourage financial intermediation.
REER appreciation is unlikely and monetary
policy response may not be needed at all if
• remittances are predominantly spent on
tradables (imports or transferred in kind)
• inflow of remittances leads to reduced
interest rate on external borrowing (if external
creditors consider remittances as part of
country’s wealth)
• remittances is and established component of
the current account and allow to suitably
finance part of the trade deficit.
4. International experience
Have remittances actually led to the REER appreciation in some
country?
• Yes: Cape Verde(Bourdet, 2003), Pakistan (Hyder, 2005), Jordan
(Petri, 2006), Dominican Rep, El Salvador, Guatemala (Izquierdo,
2006), panel of 13 LA countries (Amuedo, 2004)
• No: Honduras, Jamaica, Nicaragua (Izquierdo, 2006) , sample of 15
Latin American countries (Rajan, 2005).
Have the authorities actually undertaken active monetary policy
measure in response to remittances?
• Yes: El Salvador with mixed results, developing countries at large
(Calvo et al., 1996)
• No: Mexico (Riuz, 208), Tajikistan (Kireyev, 2006), seven Latin
Amrican countries (Ball et al, 2009)
Remittances influence the choice of the exchange rate regime (Singer,
2010)
5. Conclusions
• Impulsive and cyclical remittances may present significant
challenges for macroeconomic management by destabilizing money
supply and leading to REER appreciation above the equilibrium
level. Active monetary policy is appropriate with the view to resist
temporary REER appreciation in this case.
• Orderly remittances, already included in the economic structure of
receiving economy, should be treated as any other regular inflows,
lead to a more appreciated level of the equilibrium REER, and
generally do not pose problems for macroeconomic management.
Active monetary policy is not needed in this case.
• International evidences on whether remittances have posed serious
problems for monetary and exchange rate policies are mixed but
generally point to the fact the some REER appreciation should be
expected.