Are remittances a stabilizing factor in the Mexican economy? (original) (raw)

The Importance of Macroeconomic Conditions on Remittances: the Case of Mexico

In this document we evaluate how macroeconomic conditions influence the amount of remittances sent to Mexico from the United States. Specifically, we perform cointegration tests to determine the existence and magnitude of common trends between remittances and variables believed to influence their dynamics; including employment in the states of Arizona, California, Illinois and Texas, the real exchange rate, credit granted to the private sector and inflation in Mexico. In addition, common cycle tests are performed to identify common transitory movements among said variables. Our findings indicate that employment in the US, and credit and inflation in Mexico, affect significantly the amount of remittances sent in the long-run. In addition, the real exchange rate and remittances are found to be positively related in the long-run but negatively associated in the short-run. That is, a devaluation of the Mexican currency decreases the flows of remittances transitorily, but it increases them in longer horizons.

Remittances and development in Mexico. A critical overview from the macro-economics perspective

This job presents statistical information with the intention of documenting a critical vision on the remittances issues. It is analyzed from a macro-economical dimension the role and meaning of the remittances in the recent economical growth and development in Mexico, particularly in the relation to the remittances’ volume and economical behavior, in relation to other basic macro-economical variables. The hypothesis are confirmed, that in macro-economical terms, the remittances fundamentally constitute a familiar transference funds which have a scarce or null impact on the growth capability and economical development; besides, in Mexico the remittances have not followed a linear and growing tendency. So in moments of stability and economical growth, remittances have been relatively stable, whereas they are significantly increased in the economical crisis periods.

Remesas y desarrollo en México. Una visión crítica desde la macroeconomía

Papeles de población, 2006

This job presents statistical information with the intention of documenting a critical vision on the remittances issues. It is analyzed from a macro-economical dimension the role and meaning of the remittances in the recent economical growth and development in Mexico, particularly in the relation to the remittances' volume and economical behavior, in relation to other basic macro-economical variables. The hypothesis are confirmed, that in macro-economical terms, the remittances fundamentally constitute a familiar transference funds which have a scarce or null impact on the growth capability and economical development; besides, in Mexico the remittances have not followed a linear and growing tendency. So in moments of stability and economical growth, remittances have been relatively stable, whereas they are significantly increased in the economical crisis periods.

Remittances in Mexico and their Unobserved Components

The Journal of International Trade & Economic Development,, 2019

The present study aims to determine the common trends and the permanent and transitory components of remittances received by Mexican households. This is done by estimating a small Dynamic Factor Model (DFM), using the approach first proposed by "Estimation of Common Long-memory Components in Cointegrated Systems." Journal of Business and Economic Statistics 13 (1): 27-35], determining the number of common trends subject to the cointegration results. The study also shows the similarities between this small DFM with respect to large DFM, which are widely used in the econometric literature. The results indicate the presence of one cointegration relationship. Consequently, there are four common trends. The cointegration relationship is negatively dominated by Mexico's economic activity and positively by the US industrial production. The effects of the exchange rate and the US unemployment rate are positive, but less relevant. This economic scenario leads to remittances exceeding its permanent component.

Do Remittances Promote Labor Productivity in Mexico? A DOLS and FMOLS Analysis, 1970-2017

Bulletin of Applied Economics, 2023

This paper investigates the impact of remittance flows on economic output and labor productivity for Mexico during the 1970-2017 period. The findings suggest that remittance flows to Mexico have a positive and significant effect on economic output and labor productivity. The paper is organized as follows: First, it gives an overview of remittance flows in absolute terms, relative to GDP, in comparison to FDI inflows, and in terms of their regional destination. Next, the paper reviews the growing literature that assesses the impact of remittances on investment spending and economic growth. Third, to motivate the discussion of the empirical results, the paper presents a simple endogenous growth model that explicitly incorporates the potential impact of remittance flows on economic output and labor productivity. Fourth, it presents a modified empirical counterpart to the simple model that tests for unit roots and performs both a Johansen cointegration test and a Gregory and Hansen cointegration test with an endogenously determined regime shift. FMOLS and DOLS long-run estimates for the period in question suggest that remittance flows to Mexico have a positive and significant effect, albeit small, on both the levels of economic output and labor productivity. The concluding section summarizes the major results and discusses potential avenues for future research on this important topic.

Remittances and Economic Growth in Mexico: An Empirical Study with Structural Breaks, 1970-2010

Business and Economic Research, 2014

This paper investigates remittance flows to Mexico during the 1980-2010 period in absolute terms, relative to GDP, in comparison to FDI inflows, and in terms of their regional destination. Next, the paper reviews the growing literature that assesses the impact of remittances on investment spending and economic growth. Third, it presents a simple endogenous growth model that explicitly incorporates the potential impact of remittance flows on economic and labor productivity growth. Fourth, it presents a modified empirical counterpart to the simple model that tests for both single-and two-break unit root tests, as well as performs cointegration tests with an endogenously determined level shift over the 1970-2010 period. The error-correction model estimates suggest that remittance flows to Mexico have a positive and significant effect, albeit small, on both economic growth and labor productivity growth. The concluding section summarizes the major results and discusses potential avenues for future research on this important topic.

Exploring the causes of the slowdown in remittances to Mexico

Empirical Economics, 2011

This paper examines some of the possible reasons for the slowdown of remittances to Mexico. The analysis suggests that improvements in remittance data collection, although important, do not account for the full reduction in the remittances growth rate. The findings show that different proxies for Mexican unemployment in the United States have a negative relationship with remittances to Mexico, while the impact of U.S. output on remittance transfers does not seem to be strong. The study also finds that U.S. housing variables affect remittance transfers, with a particular prominence of the number of houses sold in the United States. Overall, the results seem to suggest that there is not a single reason for the slowdown/decrease of remittances to Mexico, but rather a combination of factors. This fact makes the creation of policy responses to the reduction in migrants' transfers a challenging process.

Remittances as an Economic Stabilizer: How Remittance Inflows Reduce Output

2024

This study investigates the relationship between remittance inflows and output volatility in Egypt from 2008-2022 using time series data and econometric analysis. The results provide evidence that increased remittance inflows have a stabilizing macroeconomic impact by reducing real GDP growth volatility. The findings suggest remittances help dampen economic cycles and cushion external shocks through countercyclical dynamics that enable consumption smoothing, augment reserves, and fund social safety nets during downturns. OLS regressions demonstrate a statistically significant negative relationship between remittances as a percentage of GDP and GDP growth volatility after controlling for other factors. Correlation analysis and Granger causality tests also reveal relationships consistent with remittances influencing output stability. The results align with previous studies showing remittances can act as an automatic stabilizer. Policy implications include incentivizing remittances and channeling them towards productive investments and social protection to enhance economic resilience. Despite