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

Author/Editor:

Luis René Cáceres ; Nolvia Nery Saca

Publication Date:

November 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 2006/250

Subject:

English

Publication Date:

November 1, 2006

ISBN/ISSN:

9781451865103/1018-5941

Stock No:

WPIEA2006250

Pages:

30

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