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

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Author Info
Nolvia N. Saca
Luis René Cáceres
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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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/250.

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Length: 30 pages
Date of creation: 08 Nov 2006
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Handle: RePEc:imf:imfwpa:06/250

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Related research
Keywords: Remittances ; mechanism of transmission ; Workers remittances ; El Salvador ; Economic indicators ; Economic policy ; Capital formation ; Economic models ;

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References listed on IDEAS
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.:
  1. 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. [Downloadable!] (restricted)
  2. Raghuram Rajan & Arvind Subramanian, 2005. "What Undermines Aid's Impact on Growth?," IMF Working Papers 05/126, International Monetary Fund. [Downloadable!]
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  3. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Hausmann, Ricardo & Rodrik, Dani, 2002. "Economic Development as Self-Discovery," Working Paper Series rwp02-023, Harvard University, John F. Kennedy School of Government. [Downloadable!]
    Other versions:
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Cited by:
(explanations, 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.)

  1. Christopher P. Ball & Martha Cruz-Zuniga & Claude Lopez & Javier Reyes, 2008. "Remittances, Inflation and Exchange Rate Regimes in Small Open Economies," University of Cincinnati, Economics Working Papers Series 2008-03, University of Cincinnati, Department of Economics. [Downloadable!]
  2. Ziesemer, Thomas, 2008. "Worker remittances, migration, accumulation and growth in poor developing countries," UNU-MERIT Working Paper Series 063, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
  3. Smita Wagh & Sanjeev Gupta & Catherine A. Pattillo, 2007. "Impact of Remittances on Poverty and Financial Development in Sub-Saharan Africa," IMF Working Papers 07/38, International Monetary Fund. [Downloadable!]
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This page was last updated on 2009-11-20.

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