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Remittances and their Response to Portfolio Variables

Author

Listed:
  • Catalina Amuedo-Dorantes

    () (Department of Economics, San Diego State University)

  • Susan Pozo

    () (Department of Economics, Western Michigan University)

Abstract

Using a recent Spanish database on immigrants from all across the globe, we show that remittances respond to differences in macroeconomic conditions at home and abroad. This behavior suggests that immigrants are sophisticated economic optimizers who take advantage of differential returns when accumulating assets. Immigrants remit more when per capita GDP growth rates at home are greater than in Spain, when the home-host real interest-rate differential increases, and when real exchange-rate uncertainty is higher. These patterns differ with ownership of home country assets and with the area of the globe from which immigrants originate, whether it is Africa, the Americas, Europe or Asia. The response of remittances to cross-country differences in portfolio variables suggests that remittances may not be counter-cyclical as often claimed. Hence, paradoxically, while remittances may promote consumption-smoothing at the individual or household level, remittances cannot be relied upon to shore up migrant-sending economies in times of need.

Suggested Citation

  • Catalina Amuedo-Dorantes & Susan Pozo, 2010. "Remittances and their Response to Portfolio Variables," CReAM Discussion Paper Series 1021, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  • Handle: RePEc:crm:wpaper:1021
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    References listed on IDEAS

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    1. Amuedo-Dorantes, Catalina & Mazzolari, Francesca, 2010. "Remittances to Latin America from migrants in the United States: Assessing the impact of amnesty programs," Journal of Development Economics, Elsevier, vol. 91(2), pages 323-335, March.
    2. Dean Yang, 2008. "International Migration, Remittances and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks," Economic Journal, Royal Economic Society, vol. 118(528), pages 591-630, April.
    3. Adams Jr., Richard H. & Cuecuecha, Alfredo, 2010. "Remittances, Household Expenditure and Investment in Guatemala," World Development, Elsevier, vol. 38(11), pages 1626-1641, November.
    4. Bugamelli, Matteo & PaternĂ², Francesco, 2009. "Do Workers' Remittances Reduce the Probability of Current Account Reversals?," World Development, Elsevier, vol. 37(12), pages 1821-1838, December.
    5. Faini, Riccardo, 1994. "Workers Remittances and the Real Exchange Rate: A Quantitative Framework," Journal of Population Economics, Springer;European Society for Population Economics, vol. 7(2), pages 235-245.
    6. Matthew Higgins & Alketa Hysenbegasi & Susan Pozo, 2004. "Exchange-rate uncertainty and workers' remittances," Applied Financial Economics, Taylor & Francis Journals, vol. 14(6), pages 403-411.
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