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What Do Remittances Do? Analyzing the Private Remittance Transmission Mechanism in El Salvador

  • Luis René Cáceres
  • Nolvia Nery Saca
Registered author(s):

    Family remittances are important for El Salvador's economy. This paper analyzes the impact of remittances on El Salvador's economy and the spillover effects on the other Central American countries. A vector autoregression (VAR) model is formulated, consisting of real and monetary variables. The results suggest that in, El Salvador, remittances lead to decreases in economic activity, international reserves, and money supply and increases in the interest rate, imports, and consumer prices. This underscores the need for reorienting economic policy in El Salvador to promote the use of remittances in capital formation activities to maximize the benefit of remittances.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/250.

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    Length: 30
    Date of creation: 01 Nov 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/250
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    1. repec:idb:brikps:publication-detail,7101.html?id=6686 is not listed on IDEAS
    2. Edwards, Alejandra Cox & Ureta, Manuelita, 2003. "International migration, remittances, and schooling: evidence from El Salvador," Journal of Development Economics, Elsevier, vol. 72(2), pages 429-461, December.
    3. Hausmann, Ricardo & Rodrik, Dani, 2002. "Economic Development as Self-Discovery," Working Paper Series rwp02-023, Harvard University, John F. Kennedy School of Government.
    4. Gert Peersman, 2004. "The Transmission of Monetary Policy in the Euro Area: Are the Effects Different Across Countries?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(3), pages 285-308, 07.
    5. Arvind Subramanian & Raghuram Rajan, 2005. "What Undermines Aid's Impacton Growth?," IMF Working Papers 05/126, International Monetary Fund.
    6. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
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