The Impact of Remittance Flow on Real Effective Exchange Rate: Empirical Evidence from The Gambia

The paper investigates the impact of remittance on real effective exchange rate in The Gambia. The Fully Modified OLS and Dynamic OLS are used on a monthly data from 2009M1 to 2019M12. FMOLS and DOLS estimations revealed that remittance has a positive significant impact on real effective exchange rate in The Gambia, implying that 1% increment in remittance leads to a real appreciation of the Gambian Dalasi (GMD) against the major currencies by 1.5%. Likewise, inflation is positively associated with REER, while the relationship amid foreign reserves and REER is inconclusive. Contrarily, money supply and monetary policy rate were found to have a depreciating impact on REER in both models.