Macroeconomic determinants of remittances for a dollarized economy: the case of El Salvador
Purpose - Traditionally, remittances have been analyzed in the context of their socioeconomic impact on the receiving communities. Consequently, little is known about the macroeconomic factors that influence their behavior. This paper aims to evaluate the importance of several macroeconomic indicators on the flow of remittances from the USA to El Salvador. Design/methodology/approach - The analysis considers cointegration and common cycle tests. It includes as explanatory variables gross domestic product (GDP) and the interest rates differential in El Salvador, employment in California, and M2 as a measure of the stance of US monetary policy. These variables are intended to capture macroeconomic conditions in the host and home countries. Findings - The study finds that all variables share a common trend and a common cycle with remittances; though the association with the interest rates differential in the short-run is weak. That is, remittances respond significantly to transitory and permanent changes in macroeconomic conditions. El Salvador's GDP is negatively associated with remittances, while employment, the interest rates differential, and M2 exhibit a direct relationship at both time horizons. Practical implications - Understanding how macroeconomic conditions influence the supply of US dollars via remittances is fundamental for policy makers in a dollarized economy. In the absence of tools to implement discretionary monetary policy, officials in El Salvador can benefit from learning how the flows of US dollars to the economy respond to macroeconomic shocks. Originality/value - Analyzing the macroeconomic determinants of remittances for a dollarized economy is a novel exercise. Furthermore, the combined long- and short-run approach allows recognizing how macroeconomic conditions influence this capital flow in the steady state and during transitory episodes.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 38 (2011)
Issue (Month): 5 (September)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://www.emeraldinsight.com/jes.htm Email:
When requesting a correction, please mention this item's handle: RePEc:eme:jespps:v:38:y:2011:i:5:p:562-576. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.