How is remittance related to prices and output? New evidence from Fiji’s data

Abstract

This article uses a dynamic macroeconomic model to analyze how remittances affect Fijian prices and output. We find that remittance growth enhances price factor growth and decreases inflation using time-series data. Remittance increase also hurts output factor growth, which has major economic effects. Due to Fiji's particular reliance on remittances, single-country analysis is needed to explain macroeconomic dynamics. We integrate remittances into a business cycle framework and simulate their effects on prices and output to add to the research and inform fiscal and monetary policy in remittance-dependent nations.