There are various macroeconomic effects of the remittances on the economy of the country. The large inflows in foreign currency lead to domestic currency to appreciate. It leads to making the country’s exports less price-competitive as goods get expensive for other countries with the rise in domestic currency. With the rise in value of the domestic currency, the consumption of imports rises. The inflow of cash assists the recipient country in reducing its balance of payments.
The migrants usually go to that country where the likelihood of work is the highest. The jobs are mostly related to the construction-related work. A large number of workers go to countries that are developing their economies and the commodity-rich countries also have good demand for labour.
As per report by the OECD, there is approximately 3% of the world’s population that are living outside their home country in the year 2000. As the world becomes integrated and globalized, the labour movements between countries have become fluid and large number of workers moves abroad looking for better jobs and career prospects. As a result, the immigrants who earn to send their earnings for their families back home form an integrated part of the economy.
Migrant send the remittance back to home countries in many ways like wire transfer, via banks, demand draft or cheques. These funds sent by immigrants are keeping the wire transfer companies well in business and permit the home country to buy imports. The immigrants consume the goods and services offered by domestic workers. The presence of foreign workers assists in alleviating labour shortages. The immigrant workers assist the developed countries in expanding while sending part of their incomes as remittances. Moreover, the social networks created by foreign workers leads to more integrated cultural understanding by interactions between local populations and migrants.