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Are remittances a stabilizing factor in the Mexican economy?

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  • Jorge Eduardo Mendoza Cota

    (El Colegio de la Frontera Norte)

Abstract

This paper evaluates whether remittances can function as a countercyclical mechanism for a recessive phase of the business cycle in Mexico. Remittances have resulted from the intense migration of Mexican workers to the USA during the nineties. The flow of remittances in Mexico had an explosive growth until the year 2006; since 2007, a drastic drop in this growth is observed, and in 2008 it became negative. A panel data model was established using information of the GDP and remittances at the state level for the period 2005-2008. This methodology considersthe regional effects of remittances on the economic growth of the Mexican economy. The econometric results of the analysis indicated that remittances have a positive coefficient with respect to the position of the business cycle in Mexico. Additionally, the findings weaken the positions of those that consider the strategy of promoting remittances for use as a tool formacroeconomic stabilization of the business cycle.

Suggested Citation

  • Jorge Eduardo Mendoza Cota, 2012. "Are remittances a stabilizing factor in the Mexican economy?," EconoQuantum, Revista de Economia y Negocios, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 9(1), pages 83-99, Enero-Jun.
  • Handle: RePEc:qua:journl:v:9:y:2012:i:1:p:83-99
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    References listed on IDEAS

    as
    1. Ralph Chami & Connel Fullenkamp & Samir Jahjah, 2005. "Are Immigrant Remittance Flows a Source of Capital for Development?," IMF Staff Papers, Palgrave Macmillan, vol. 52(1), pages 55-81, April.
    2. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    3. Miguel D. Ramirez & Hari Sharma, 2009. "Remittances and Growth in Latin America: A Panel Unit Root and Panel Cointegration Analysis," Estudios Economicos de Desarrollo Internacional, Euro-American Association of Economic Development, vol. 9(1).
    4. Rapoport, Hillel & Docquier, Frederic, 2006. "The Economics of Migrants' Remittances," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
    5. Elke Holst & Mechthild Schrooten, 2006. "Migration and Money - What Determines Remittances?: Evidence from Germany," Discussion Papers of DIW Berlin 566, DIW Berlin, German Institute for Economic Research.
    6. Serdar Sayan, 2006. "Business Cycles and Workers' Remittances; How Do Migrant Workers Respond to Cyclical Movements of GDP At Home?," IMF Working Papers 06/52, International Monetary Fund.
    7. Connel Fullenkamp & Thomas F. Cosimano & Michael T. Gapen & Ralph Chami & Peter J Montiel & Adolfo Barajas, 2008. "Macroeconomic Consequences of Remittances," IMF Occasional Papers 259, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    remittances; Mexican economy; GDP; economic cycles; economic integration;

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F15 - International Economics - - Trade - - - Economic Integration
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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