What Do Remittances Do? Analyzing the Private Remittance Transmission Mechanism in El Salvador
IMF Working Papers, November 1, 2006
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- What Do Remittances Do? Analyzing the Private Remittance Transmission Mechanism in El Salvador
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Bibliographic details
- Authors: Luis René Cáceres, Nolvia Nery Saca
- Published: November 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451865103.001
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.
Methodology
- Empirical approach: vector autoregression (VAR) model.
- Model variables: real and monetary variables (as specified by the paper).
Key Findings and Effects
- Remittances are associated with:
- Decreases in economic activity.
- Decreases in international reserves.
- Decreases in money supply.
- Increases in the interest rate.
- Increases in imports.
- Increases in consumer prices.
Policy Implications and Recommendations
- Reorient economic policy in El Salvador to promote the use of remittances in capital formation activities.
- Aim: maximize the benefit of remittances by shifting their use away from consumption toward investment/capital formation.
Publication and Metadata
- Authors: Luis René Cáceres, Nolvia Nery Saca
- Publication date: November 1, 2006
- Series: Working Paper No. 2006/250
- Issue: 250
- Volume: 2006
- Pages: 30
- DOI: https://doi.org/10.5089/9781451865103.001
- Stock No: WPIEA2006250
- ISBN: 9781451865103
- ISSN: 1018-5941
- Subject keywords: Imports, International reserves, Monetary base, Real exchange rates, Remittances
- Additional keywords: economic activity, exchange rate, price level, remittance, result, WP
Luis René Cáceres, and Nolvia Nery Saca. "What Do Remittances Do? Analyzing the Private Remittance Transmission Mechanism in El Salvador", IMF Working Papers 2006, 250 (2006), accessed 9/17/2026, https://doi.org/10.5089/9781451865103.001