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This article examines the macroeconomic factors influencing the flow of remittances to selected English-speaking Caribbean countries. A balanced two way fixed effects (FE) model, a random effects (RE) model and the adjusted fully modified ordinary least squares (FMOLS) model (designed to correct biases in OLS)are employed in estimating a relationship between per capita remittances and selected macroeconomic variables. This article also examines the time series properties of the data within a panel unit root and cointegration framework and in this respect, adds an important new dimension to the time series models on remittances by removing the possibility of a spurious relationship (Pedroni 1995,1997, 2000). The results strongly suggest that there is cointegration among the variables, and that remittances are influenced not only by altruistic motives but also by the investment motive in financial instruments. In addition, the results further indicate that there may be scope for public policy to increase these flows

This study develops proxies for each of Levine's (1997) five functions of the financial sector, and models the relationship between these functions and economic growth using methods that more accurately conform to theory, and which broaden our understanding of the mechanisms through which the financial sector impacts on growth. Our analytical models provide for inferences about the relative importance of each of the functions of the financial sector and cointegration and error correction methods are used to distinguish between the long and short-run impacts of financial sector intermediation on economic growth. Our results suggest that if financial sector reforms are to be more effective, greater focus has to be placed on mechanisms through which savings mobilization can be maximized, and the allocation of resources to productive uses can be facilitated. Policymakers should also not expect immediate results from such reforms, as although the functions of the financial sector were shown to have statistically significant long-run impacts on GDP, none of the functions had significant short-term effects on growth.

This article uses a time varying parameter model (TVP) to examine the macroeconomic determinants of cash remittances to Jamaica over the period January 1983 to April 2001. We anticipated a positive relationship between changes in remittances and foreign income. We find an investment component in the relationship between changes in remittances and domestic income. In addition, the relationship between changes in remittances, the unofficial exchange rate premium and the exchange rate differential are in line with our expectations. In terms of the policy dimension of the results, it is clear that domestic policy has a significant impact on the responses of remitters. These responses do not merely reflect altruistic concerns for relatives but also investment related considerations. This means that policy makers might be able, through deliberate policy, to influence the flow of remittances over time.

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