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Remittances play a large and important role in certain economies, where they became a significant share of GDP. Official government records of these flows have been systematically improved since governments realized their importance, but a significant percentage of remittances remain unrecorded. This, together with the shadow economy, may pose a problem for monetary policy. This article uses a limited participation model to examine the differential effect that higher shares of remittances can have on monetary policy and describes the impact of remittances on a small open economy under partial sterilization. It demonstrates how a typical monetary shock will lead to a more pronounced liquidity effect when remittances become a higher proportion of GDP. It also shows that a positive remittance shock improves consumption and lowers interest rates, but as it also reduces work effort it momentarily lowers output. Such dynamics are exacerbated as the degree of partial sterilization is accentuated.

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This study examines the impact of a remittances shock on the main macroeconomic aggregates of a small open economy. It uses a stochastic limited participation model to generate dynamics that are consistent with the empirical literature, like the increase in inflation, consumption, and leisure. However, the remittances shock generates a prolonged decline in GDP, which only diminishes when remittances are a larger percentage of GDP, the fraction of remittances directed towards investment increases, or when the fraction of labor income that remittances represent is reduced and is overturned when the persistence of the remittances shocks is shortened.

This article examines the impact of monetary policy on net sales of publicly traded firms in various sectors of the U.S. economy. We find that monetary policy has a heterogeneous effect on firms in different industries, with the strongest effect on firms in Retail and Wholesaling. Balance sheet characteristics, especially size, influence the impact of policy. Larger firms in several industries are able to mitigate the effect of policy. We find mixed results for firms' working capital, short-term debt ratio, and leverage ratio with respect to the operation of the credit channel of monetary transmission mechanism.