Remittance flows and US monetary policy

Abstract

Remittance inflows are driven by macroeconomic conditions in the home and the host economies, respectively. In this paper, we study the effect of US monetary policy on remittance flows into economies in Latin American and the Caribbean. The role of Fed policy for remittances has not yet been studied. We estimate a series of panel local projections for remittance inflows into eight countries. A surprise change in US monetary conditions has a strong and highly significant negative effect on inflows. Our finding remains robust if we change the sample period or include additional variables. Hence, our paper establishes a remittance-channel through which the Fed affects the business cycle abroad.

Climate Change and Inflation in Eastern and Southern Africa

“…GMM is considered a more efficient estimator in comparison to other estimators because it can avoid the bias of ordinary least square methods when an explanatory variable in a regression is correlated with the regression's disturbance term. Moreover, GMM provides theoretically based and powerful instruments that account for simultaneity while eliminating any unobservable heterogeneity [72]. GMM estimator also solves the problems of serial correlation and heteroscedasticity.…”