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Are remittances a stabilizing factor in the Mexican economy?

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  • Jorge Eduardo Mendoza Cota

    (El Colegio de la Frontera Norte)

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    Abstract

    This paper evaluates whether remittances can function as a countercyclical mechanism for a recessive phase of the business cycle in Mexico. Remittances have resulted from the intense migration of Mexican workers to the USA during the nineties. The flow of remittances in Mexico had an explosive growth until the year 2006; since 2007, a drastic drop in this growth is observed, and in 2008 it became negative. A panel data model was established using information of the GDP and remittances at the state level for the period 2005-2008. This methodology considersthe regional effects of remittances on the economic growth of the Mexican economy. The econometric results of the analysis indicated that remittances have a positive coefficient with respect to the position of the business cycle in Mexico. Additionally, the findings weaken the positions of those that consider the strategy of promoting remittances for use as a tool formacroeconomic stabilization of the business cycle.

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    Bibliographic Info

    Article provided by Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia. in its journal EconoQuantum, Revista de Economia y Negocios.

    Volume (Year): 9 (2012)
    Issue (Month): 1 (Enero-Junio)
    Pages: 83-99

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    Handle: RePEc:qua:journl:v:9:y:2012:i:1:p:83-99

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    Related research

    Keywords: remittances; Mexican economy; GDP; economic cycles; economic integration;

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    1. Miguel D. Ramirez & Hari Sharma, 2009. "Remittances and Growth in Latin America: A Panel Unit Root and Panel Cointegration Analysis," Estudios Economicos de Desarrollo Internacional, Euro-American Association of Economic Development, Euro-American Association of Economic Development, vol. 9(1).
    2. Rapoport, Hillel & Docquier, Frédéric, 2005. "The Economics of Migrants’ Remittances," IZA Discussion Papers 1531, Institute for the Study of Labor (IZA).
    3. Holst, Elke & Schrooten, Mechthild, 2006. "Migration and Money: What determines Remittances? Evidence from Germany," Discussion Paper Series, Institute of Economic Research, Hitotsubashi University a477, Institute of Economic Research, Hitotsubashi University.
    4. Connel Fullenkamp & Thomas F. Cosimano & Michael T. Gapen & Ralph Chami & Peter Montiel & Adolfo Barajas, 2008. "Macroeconomic Consequences of Remittances," IMF Occasional Papers 259, International Monetary Fund.
    5. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    6. Serdar Sayan, 2006. "Business Cycles and Workers' Remittances," IMF Working Papers 06/52, International Monetary Fund.
    7. Samir Jahjah & Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development," IMF Working Papers 03/189, International Monetary Fund.
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