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Remittance Flows and Economic Growth in Mexico: A Single Break Unit Root and Cointegration Analysis, 1970-2009

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  • Miguel Ramirez

    ()
    (Department of Economics, Trinity College)

Abstract

This paper gives an overview of remittance flows to Mexico during the 1980-2009 period in absolute terms, relative to GDP, in comparison to FDI inflows, and in terms of their regional destination. Next, the paper reviews the growing literature that assesses the impact of remittances on investment spending and economic growth. Third, it develops a simple endogenous growth model that explicitly incorporates the potential impact of remittance flows on economic and labor productivity growth. Fourth it presents an empirical counterpart to the conceptual model and, using single-break unit root and cointegration analysis, proceeds to determine the impact of changes in these flows on economic growth and labor productivity growth over the 1970-2009 period. The error-correction model estimates suggest that remittance flows to Mexico, along with other relevant variables, have a positive and significant effect on both economic growth and labor productivity growth. The concluding section summarizes the major results and discusses potential avenues for future research on this important topic.

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File URL: http://internet2.trincoll.edu/repec/WorkingPapers2011/wp11-06.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Trinity College, Department of Economics in its series Working Papers with number 1106.

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Length: 36 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:tri:wpaper:1106

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Related research

Keywords: Error-correction model; FDI inflows; Johansen Cointegration test; labor productivity growth; remittance flows; Theil inequality coefficient; Zivot-Andrews single-break unit root analysis;

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  1. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
  2. Giuliano, Paola & Ruiz-Arranz, Marta, 2006. "Remittances, Financial Development, and Growth," IZA Discussion Papers 2160, Institute for the Study of Labor (IZA).
  3. David A. Aschauer, 1989. "Back of the G-7 pack: public investment and productivity growth in the Group of Seven," Working Paper Series, Macroeconomic Issues 89-13, Federal Reserve Bank of Chicago.
  4. Ramirez, Miguel D. & Sharma, Hari, 2008. "Remittances and Growth in Latin America: A Panel Unit Root and Panel Cointegration Analysis," Working Papers 51, Yale University, Department of Economics.
  5. M. Ramirez, 2000. "Foreign Direct Investment in Mexico: A Cointegration Analysis," Journal of Development Studies, Taylor & Francis Journals, vol. 37(1), pages 138-162.
  6. 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.
  7. Ananth Ramanarayanan, 2009. "Ties that bind: bilateral trade's role in synchronizing business cycles," Economic Letter, Federal Reserve Bank of Dallas, vol. 4(jan).
  8. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  9. Waheed, Muhammad & Alam, Tasneem & Ghauri, Saghir Pervaiz, 2006. "Structural breaks and unit root: evidence from Pakistani macroeconomic time series," MPRA Paper 1797, University Library of Munich, Germany.
  10. David A. Aschauer, 1989. "Public investment and productivity growth in the Group of Seven," Economic Perspectives, Federal Reserve Bank of Chicago, issue Sep, pages 17-25.
  11. Jesus Canas & Roberto Coronado & Pia Orrenius, 2007. "Explaining the increase in remittances to Mexico," Southwest Economy, Federal Reserve Bank of Dallas, issue Jul, pages 3-7.
  12. Sen, Amit, 2003. "On Unit-Root Tests When the Alternative Is a Trend-Break Stationary Process," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 174-84, January.
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