Latin American Remittances Dependence On External Shocks

Remittances have become an important and reliable source of funds for many developing countries, particularly Latin American countries. The inflow of remittances has been shown to improve consumption levels, health care access, educational attainment, and the implementation of entrepreneurial initiatives, affecting the economic prospects of the receiving countries. However, economic conditions in the host-countries have proven to be influential in immigrants’ earnings and their ability to send money to their families back home. This article measures the impact that economic fluctuations in the U.S. and Spain have in the amount of remittances received by 5 Latin American countries, showing that migrant workers tend to send more funds home when the state of the economy in which they reside improves. Our results also show that shocks to specific sectors of the host country produce a differential effect on the remittances flowing to different countries, both in terms of magnitude and sometimes direction.