The Tale of Three Amigos: Remittances, Exchange Rates and Money Demand in Mexico

Carlos Vargas-Silva

No 704, Working Papers from Sam Houston State University, Department of Economics and International Business

Abstract: This article analyzes the relationship between remittances, exchange rates and money demand in Mexico. We find that shocks to remittances have a positive impact on domestic money demand. The results also suggest the existence of a bi-directional relationship between remittances and the exchange rate. Furthermore, positive shocks to remittances are found to have a negative impact on Mexico’s real exchange rate. This indicates that remittances appreciate the Mexican peso and therefore, may impact the competitiveness of the tradable sector negatively.

Date: 2007-09
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Related works:
Journal Article: The Tale of Three Amigos: Remittances, Exchange Rates, and Money Demand in Mexico (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:shs:wpaper:0704

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