This paper examines the macroeconomic determinants of migrants' remittances cycles. The study uses panel VAR methods in order to compensate for both data limitations and endogeneity among variables. The analysis considers annual data for 16 latin and Caribbean countries. By using these data I compute variance decompositions (VDCs) and impulse response functions (IRFs). The VDCs show that the forecast error variance of remittances is explained by host country GDP, home country GDP and the differential of interest rates between home and host countries. The IRFs analysis confirms these findings. First, the IRFs show that remittances respond positively to boom in host country. Second, for altruistic motivations, a recession in home country is accompanied by a increase in remittances inflows. The last result, related to self-interested motivations, is the increase in remittances inflows following a rise in the differential of interest rates between home and host countries.
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Find related papers by JEL classification: F22 - International Economics - - International Factor Movements and International Business - - - International Migration F24 - International Economics - - International Factor Movements and International Business - - - Remittances O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
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