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The Importance Of Macroeconomic Conditions On Remittances In The Long-Run And In The Short-Run: The Case Of Mexico

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  • Ramon A. CASTILLO-PONCE
  • Maria de Lourdes RODRIGUEZ-ESPINOSA
  • Erika GARCIA-MENESES
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    Abstract

    In this document we evaluate how macroeconomic conditions influence the amount of remittances sent to Mexico from the United States in the long-run and in the short-run. Specifically, we perform cointegration tests to determine the existence and magnitude of common trends between remittances and variables believed to influence their dynamics; including employment in the host country, the real exchange rate, credit granted to the private sector and inflation in Mexico. In addition, common cycle tests are performed to identify common transitory movements among said variables. Our findings indicate that employment in the US, and credit and inflation in Mexico, significantly affect remittances in the long-run. The real exchange rate and remittances are found to be positively related in the long-run, but negatively associated in the short-run.

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    Bibliographic Info

    Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

    Volume (Year): 11 (2011)
    Issue (Month): 1 ()
    Pages:

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    Handle: RePEc:eaa:aeinde:v:11:y:2011:i:1_8

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    Related research

    Keywords: remittances; macroeconomic conditions; cointegration; common cycles.;

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    References

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    1. Carlos Vargas-Silva & Peng Huang, 2005. "Macroeconomic Determinants of Workers’ Remittances: Host vs. Home Country’s Economic Conditions," International Finance 0507007, EconWPA, revised 29 Jul 2005.
    2. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
    3. Issler, Joao Victor & Vahid, Farshid, 2001. "Common cycles and the importance of transitory shocks to macroeconomic aggregates," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 449-475, June.
    4. Adams, Richard Jr. & Page, John, 2005. "Do international migration and remittances reduce poverty in developing countries?," World Development, Elsevier, vol. 33(10), pages 1645-1669, October.
    5. El-Sakka, M. I. T. & McNabb, Robert, 1999. "The Macroeconomic Determinants of Emigrant Remittances," World Development, Elsevier, vol. 27(8), pages 1493-1502, August.
    6. Ramón A. Castillo Ponce & Jorge Herrera Hernández, 2005. "Efecto del gasto público sobre el gasto privado en México," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 20(2), pages 173-196.
    7. Jorge Herrera Hernández, 2004. "Business cycles in Mexico and the United States: Do they share common movements?," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 303-323, November.
    8. Rapoport, Hillel & Docquier, Frédéric, 2005. "The Economics of Migrants’ Remittances," IZA Discussion Papers 1531, Institute for the Study of Labor (IZA).
    9. Robert F. Engle & João Victor Issler, 1993. "Common trends and common cycles in Latin America," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 47(2), pages 149-176, April.
    10. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
    11. Chiquiar, Daniel & Ramos-Francia, Manuel, 2005. "Trade and business-cycle synchronization: evidence from Mexican and U.S. manufacturing industries," The North American Journal of Economics and Finance, Elsevier, vol. 16(2), pages 187-216, August.
    12. Nicholas P. Glytsos, 2005. "The contribution of remittances to growth: A dynamic approach and empirical analysis," Journal of Economic Studies, Emerald Group Publishing, vol. 32(5), pages 468-496, October.
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