The rise in remittances has potentially profound implications on a variety of national policy choices, particularly on the shift to fixed exchange rates, a study showed.

In a report, David Andrew Singer of the Massachusetts Institute of Technology said remittances stand apart from other capital flows since they do not exacerbate the trade-off between fixed exchange rates and domestic monetary policy autonomy.

Unlike foreign direct investment and bank lending, Singer said remittances are more stable and move countercyclically relative to the recipient country's economy.

"Remittances smooth the incomes of families and shield policymakers from the vagaries of the global economy. In short, financial transfers from migrants are a form of insurance for developing countries against exogenous shocks," he said.

As a result, Singer noted that remittances mitigate the cost of foregone domestic monetary policy autonomy, increasing the likelihood that policymakers adopt fixed exchange rates.

"Migrant remittances serve a similar function as centralized fiscal transfers in allowing the domestic economy to adjust to a fixed exchange rate," Singer said.

The exchange rate affects the price of all other goods and services, making it the most important price in an open economy. The choice of exchange rate regime (fixed, floating, or somewhere in between) has significant effects on the country's inflation, private investment, trading relationships, currency crises, and economic growth.

Over the past two decades, Singer said migrant remittances have emerged as a significant source of external finance for developing countries, often exceeding conventional sources of capital such as foreign direct investment and bank lending.

Aside from being an important lifeline for some of the poorest countries in the world, Singer said remittances constitute a sizeable share of gross domestic product for emerging market economies.