Evolution of Remittances to CAPDR Countries and Mexico During the COVID-19 Pandemic

By Aleksandra Babii, Alina Carare, Dmitry Vasilyev, Yorbol Yakhshilikov

May 13, 2022

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Aleksandra Babii, Alina Carare, Dmitry Vasilyev, and Yorbol Yakhshilikov. Evolution of Remittances to CAPDR Countries and Mexico During the COVID-19 Pandemic, (USA: International Monetary Fund, 2022) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Traditional models relying on standard variables like the U.S. Hispanic unemployment rate fared well in explaining remittances to CAPDR and Mexico during the pre-pandemic period. However, they fail to predict the sustained growth in remittances since June 2020, including the significant increase in the average amount remitted. Using data from over 300 remittances corridors (from 23 U.S. states to 14 Salvadoran departments), we find that this increase is primarily explained by the dynamics of U.S. states real wages, as well as more temporary factors like U.S. unemployment relief (including the extraordinary pandemic support), U.S. states mobility, and COVID-19 infections at home. The paper also analyses what role the change in the modes of transmission of remittances, additional U.S. fiscal stimulus and U.S. labor market developments, especially in the sectors were CAPDR and Mexican migrants preponderantly work, play in explaining aggregate remittances growth.

Subject: Balance of payments, COVID-19, Health, Labor, Migration, Population and demographics, Real wages, Remittances, Unemployment

Keywords: B. panel Vector Autoregression Model, Central America, COVID-19, COVID-19 pandemic, Evolution of remittance, International migration, Migrant remittances, Migration, Real wages, Remittances, Remittances dynamics, Remittances growth, Remittances to CAPDR country, Unemployment

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/092
Stock No:

WPIEA2022092
ISBN:

9798400210150
ISSN:

1018-5941

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