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What Do Remittances Do? Analyzing the Private Remittance Transmission Mechanism in El Salvador

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Author Info

  • Luis René Cáceres
  • Nolvia Nery Saca
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    Abstract

    Family remittances are important for El Salvador''s economy. This paper analyzes the impact of remittances on El Salvador''s economy and the spillover effects on the other Central American countries. A vector autoregression (VAR) model is formulated, consisting of real and monetary variables. The results suggest that in, El Salvador, remittances lead to decreases in economic activity, international reserves, and money supply and increases in the interest rate, imports, and consumer prices. This underscores the need for reorienting economic policy in El Salvador to promote the use of remittances in capital formation activities to maximize the benefit of remittances.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/250.

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    Length: 30
    Date of creation: 01 Nov 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/250

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    Related research

    Keywords: Workers remittances; Economic indicators; Capital formation; Economic models; remittances; exchange rate; remittance; effects of remittances; real exchange rate; foreign exchange; migration; inflow of remittances; remittance inflows; impact of remittances; exchange rate regime; effect of remittances; exchange rate appreciation; remittance inflow; benefits of remittances; use of remittances; macroeconomic effects of remittances; exchange markets; role of remittances; nominal exchange rate; increase in remittances; amounts of remittances; foreign exchange markets; fixed exchange rate regime; households receiving remittances; fixed exchange rate; effect of remittances on poverty; floating exchange rate regime; amount of remittance; floating exchange rate; market exchange rate; black market exchange rate; foreign investment; dollar remittance; inflows of remittances; importance of remittances; foreign exchange market; remittance flows; real exchange rate appreciation; exchange controls; impacts of remittances;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
    2. Hausmann, Ricardo & Rodrik, Dani, 2002. "Economic Development as Self Discovery," CEPR Discussion Papers 3356, C.E.P.R. Discussion Papers.
    3. repec:idb:brikps:6918 is not listed on IDEAS
    4. Arvind Subramanian & Raghuram Rajan, 2005. "What Undermines Aid's Impacton Growth?," IMF Working Papers 05/126, International Monetary Fund.
    5. Edwards, Alejandra Cox & Ureta, Manuelita, 2003. "International migration, remittances, and schooling: evidence from El Salvador," Journal of Development Economics, Elsevier, vol. 72(2), pages 429-461, December.
    6. Gert Peersman, 2004. "The Transmission of Monetary Policy in the Euro Area: Are the Effects Different Across Countries?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(3), pages 285-308, 07.
    7. repec:idb:brikps:publication-detail,7101.html?id=6686 is not listed on IDEAS
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    Cited by:
    1. Aysit Tansel & Pinar Yasar, 2010. "Macroeconomic Impact of Remittances on Output Growth: Evidence from Turkey," ERC Working Papers 1002, ERC - Economic Research Center, Middle East Technical University, revised Jun 2010.
    2. Delwar Hossain, 2014. "Differential Impacts of Foreign Capital and Remittance Inflows on Domestic Savings in the Developing Countries: A Dynamic Heterogeneous Panel Analysis," Departmental Working Papers 2014-07, The Australian National University, Arndt-Corden Department of Economics.
    3. Sanjeev Gupta & Catherine A. Pattillo & Smita Wagh, 2007. "Impact of Remittanceson Poverty and Financial Development in Sub-Saharan Africa," IMF Working Papers 07/38, International Monetary Fund.
    4. Gupta, Sanjeev & Pattillo, Catherine A. & Wagh, Smita, 2009. "Effect of Remittances on Poverty and Financial Development in Sub-Saharan Africa," World Development, Elsevier, vol. 37(1), pages 104-115, January.
    5. Christopher P. Ball & Claude Lopez & Javier Reyes, 2013. "Remittances, Inflation and Exchange Rate Regimes in Small Open Economies," The World Economy, Wiley Blackwell, vol. 36(4), pages 487-507, 04.

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