the impact of remittances on real exchange rates in afghanistan: ardl approach

Remittances play a crucial role in afghanistan’s economy, providing a substantial portion of the national income each year. this phenomenon remains unexplored in the context of afghanistan. utilizing seasonal data from 2007 to 2021 and using autoregressive distributed lag (ardl) developed by pesaran et al. (2001) looking at short-term and long-term co-integrations, this research attempts to find how remittances effect on real exchange rate (rer) in afghanistan. results reveal that remittances and real exchange rates have a negative but statistically significant relationship in the long run, leading to currency appreciation. while the empirical results demonstrate a positive and statistically significant relationship between the world interest rate (wir) and real exchange rate (rer) nexus in the long-run, leading to depreciation in the afghan currency. the relationship between gdp growth rate and rer nexus is negative but statistically significant, indicating that higher gdp growth strengthens the value of the afghan currency in the long-run.