This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.Family remittances are important for El Salvador's economy. This paper analyzes the impact of remittances on El Salvador's economy and the spillover effects on the other Central American countries. A vector autoregression (VAR) model is formulated, consisting of real and monetary variables. The results suggest that in, El Salvador, remittances lead to decreases in economic activity, international reserves, and money supply and increases in the interest rate, imports, and consumer prices. This underscores the need for reorienting economic policy in El Salvador to promote the use of remittances in capital formation activities to maximize the benefit of remittances.

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Presentación Reformas financieras en El SalvadorLos eventos financieros del año 1997 en El Salvador pusieron en evidencia la necesidad de hacer reformas institucionales profundas en las instituciones encargadas de velar por el desarrollo de un sis1ema financiero sano. Dichas reformas institucionales, como sería la independencia del Banco Central, requieren de un consenso político amplio.