Do Exchange Rate Depreciations Affect UAE Outward Remittances to India in the Short Run? A Behavioral Perspective

Abstract

India is the world's largest recipient of remittances, and the United Arab Emirates (UAE) is its second-largest source. Despite this economic significance, existing literature remains fragmented, lacks a dedicated focus on the UAE-India corridor, and largely overlooks post-2020 macroeconomic shocks. To address this gap, this study investigates the relationship between the AED/INR exchange rate and UAE outward remittances. Employing a quantitative methodology, the research combines time-series trend analysis, multiple Ordinary Least Squares (OLS) regression with stationary first-differenced variables, and a two-sample t-test to evaluate asymmetric currency effects. The findings show that UAE real GDP growth has a statistically significant positive effect on remittances, while Indian inflation has a significant negative impact. Conversely, the t-test indicates no statistically significant difference in remittance growth rates between rupee depreciation and appreciation phases. Ultimately, this study provides empirical insights into migrant financial behavior, offering valuable implications for policymakers managing foreign exchange and remittance inflows.