HOME AND HOST COUNTRY BUSINESS CYCLES AND REMITTANCES: THE CASE OF EL SALVADOR AND THE DOMINICAN REPUBLIC

Karla Borja

Applied Econometrics and International Development, 2013, vol. 13, issue 2, 101-118

Abstract: Remittances have become an effective source of balance of payment sustainability in several small countries in Latin America, and thus a particular concern among developmental economists is the source driving remittances into this region. This paper studies the properties and cyclical nature of remittances in El Salvador and the Dominican Republic, two countries with large per-capita remittance value in Latin America. Impulse-response functions are estimated to assess the effects that domestic GDP and US GDP have on remittances. The results evidence a counter-cyclical relationship between remittances and domestic output, corroborating the altruistic motive to remit. In addition, the US economy plays a key role in determining remittances in these countries, indicating that besides international trade and foreign direct investment, remittances further bind these nations to the US economy.

Keywords: Remittances; business cycle; Vector Autoregression models; impulse response functions; El Salvador; Dominican Republic (search for similar items in EconPapers)
JEL-codes: E32 F22 F24 O54 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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