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Monetary policy and international remittances

Author

Listed:
  • Isabel Ruiz
  • Carlos Vargas-Silva

    (Sam Houston State University, USA
    Sam Houston State University, USA)

Abstract

This article studies the response of Mexico’s monetary policy to inflows of workers’ remittances. Previous studies have shown that remittances can have an impact on several macroeconomic variables of the receiving country (e.g. exchange rate, inflation and output, among others). Mexico has the largest inflow of remittances in Latin America and the second largest inflow in the world. As such, it may be the case that the monetary authority in Mexico is taking these flows into account when selecting their monetary policy stance. Overall, the results of this study indicate that remittance shocks do not have a large impact on Mexico’s monetary policy variables. This seems to suggest that Mexico’s Central Bank main concern is inflation and that the potential appreciation of the Mexican currency as a result of increased remittance inflows might not be a priority.

Suggested Citation

  • Isabel Ruiz & Carlos Vargas-Silva, 2010. "Monetary policy and international remittances," Journal of Developing Areas, Tennessee State University, College of Business, vol. 43(2), pages 173-186, January-M.
    • Handle: RePEc:jda:journl:vol.43:year:2010:issue2:pp:173-186
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    File URL: http://muse.jhu.edu/journals/journal_of_developing_areas/v043/43.2.ruiz.html
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    Citations

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    Cited by:

    1. Immaculate Machasio & Peter Tillmann, 2016. "Remittance Infl ows and State-Dependent Monetary Policy Transmission in Developing Countries," MAGKS Papers on Economics 201638, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Jahan Abdul Raheem & Gazi M. Hassan & Mark J. Holmes, 2021. "The Impact of Remittances on Monetary Transmission Mechanisms during the Pre and Post-Conflict Eras in Sri Lanka," Working Papers in Economics 21/10, University of Waikato.
    3. Mesbah Fathy Sharaf & Abdelhalem Mahmoud Shahen, 2022. "The Threshold Impact of Remittances on Financial Development: New Evidence from Egypt," Working Papers 1545, Economic Research Forum, revised 20 Apr 2022.
    4. Irfan Ahmad Shah, 2024. "The effect of remittances on the Indian economy," International Economics and Economic Policy, Springer, vol. 21(4), pages 771-785, October.
    5. Haruna, Issahaku & Harvey, Simon K. & Abor, Joshua Y., 2016. "Does development finance pose an additional risk to monetary policy?," MPRA Paper 101637, University Library of Munich, Germany, revised 10 Jul 2016.
    6. Olumuyiwa Tolulope Apanisile, 2021. "Remittances, financial development and the effectiveness of monetary policy transmission mechanism in Nigeria: a DSGE approach (1986–2018)," Indian Economic Review, Springer, vol. 56(1), pages 91-112, June.
    7. William Miles & Samuel Schreyer, 2014. "Is monetary policy non-linear in Latin America? a quantile regression approach to Brazil, Chile, Mexico and Peru," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(2), pages 169-183, April-Jun.
    8. Issahaku, Haruna & Abor, Joshua Yindenaba & Harvey, Simon Kwadzogah, 2017. "Remittances, banks and stock markets: Panel evidence from developing countries," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1413-1427.

    More about this item

    Keywords

    Remittances; Capital Inflows; Monetary Policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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