The Impact of Risk and Uncertainty On Remittances Into Latin American Economies

Abstract

This study investigates the effects of exchange rate uncertainty and politicalrisk, after controlling for the conventional macroeconomic detenninants, on remittancestransfers into eight Latin American countries during the period of 1990-2006.The results suggest that an increase in exchange rate uncertainty reduces remittancesflows into these countries. Furthennore, an increase in political risk seems to havea negative but statistically insignificant impact on remittances transfers. Based onthe findings of this paper, we can say that governments of the remittance receivingcountries can influence the inflow of remittances by means of adopting appropriatemacroeconomic policies to reduce exchange rate uncertainty and also by improvingtheir political environments.