Dynamic Analysis for Measuring the Impact of Remittance Inflows on Inflation: Evidence From Georgia

Abstract

Remittance plays a critical role for small economies like Georgia as an unusual means of financing. In policy-making decisions, an understanding of the essence of the relationship between the amount of money exchanged and inflation is important. The paper studies the impact of remittance inflows, using quarterly data spanning a period (2000-2018), on the inflation rate in Georgia. The paper revealed that all independent variables have an effect on the long-run inflation rate; long-run inflation is positively associated with the leading explanatory variable remittance, and no relation is found in the short-run between remittance and inflation. The paper found that inflation's adjustment level to its equilibrium is 12% annually.