Working Paper Series: Special Edition of 2016 to 2018 Interns

and Ratha (2013). Zghidi et al (2016) on a study assessing the impact of FDI on economic freedom employed the same econometric method, so too did Narayan et al (2011) whose study assessed the impact that remittances have on inflation. Acosta et al (2008) employed similar techniques and they concluded that remittances in emerging economies have an important spending effect that peaks in the presence of real exchange rate appreciation. Their results indicated that the rising levels of remittances have spending effects that lead to resource movements that favour the non- tradable sector at the expense of tradable goods production. Their results also show that increases in remittances inflow causes the labour force to decline and lowers productivity in other economic sectors, a phenomenon known as the Dutch-Disease 31 , which operates stronger in fixed exchange rate regimes. Overall, the -conclusions of the literatures have not been unanimous as most concluded that remittances would not affect growth positively. They all lamented that perhaps the most persuasive evidence in support of their finding is the lack of a single example of a remittance success story - a country in which remittances led growth contributed significantly to its development. Adam Smith, the founding father of free-market economics may have identified one such success story but that was centuries ago. Smith argued that there were two important economical game- changing moments in history. They were Columbus’ discovery of a route to the Americas in 1492 and Vasco da Gama’s feat of sailing around southern Africa to find the sea route to Asia in 1498. These discoveries gave Europe a bewildered access to other regions. Historians like Vern C. (2015) stated that post Americas discoveries, ‘the resources exploited from the region and remitted back to Europe explained the gradual ascent of wealth and power that Europe today is benefiting from. These events led to the emergence of the first-ever completely global market, one that fierce international rivals sought to dominate. Europe eventually found itself at the center of the global economic network commanding large empires.’ Fast forward five centuries to today we are not seeing this reverse in gargantuan wealth being experienced in Latin America and the Caribbean region with remitted monetary resource from said Europe, and the reason for this goes without saying.

31 According the ‘Handbook of Development Economics,’ the Dutch Disease is defined as the deindustrialization of a country’s economy when the discovery of a natural resource raises the value of the nation’s currency, making manufactured goods less competitive, decreasing net exports significantly.

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