Candidate: Carlos Ivan Vargas-Silva
Degree of: Doctor of Philosophy
Susan Pozo, Chair
Abstract: In this dissertation we study the determinants and consequences of workers' remittances. Workers' remittances are the portion of earnings that migrants sent back to their countries of origin. It is imperative for developing countries to have a clear understanding of the motivations that migrants have to remit money home, in order to increase remittances inflows. It is also important to understand the impacts of remittances in the receiving countries in order to develop policies that can maximize the benefits of remittances, while minimizing any possible detrimental effects. In this dissertation we concentrate on the relationship between remittances and macroeconomic variables in the receiving countries. To this end we use both individual and aggregate level data.
After introducing the topic and reviewing the theoretical and empirical literature, in the third chapter of this dissertation we study the determinants of workers' remittances. We use data from the Legalized Population Survey and place special emphasis on the effects of exchange rate changes and exchange rate volatility on remittances.
In the fourth chapter we use Mexican aggregate-level data to study the relationship between remittances, exchange rates and money demand at the macroeconomic level. Mexico is the largest recipient of remittances from the U.S. Given that macroeconomic variables are often endogenous we emphasize on the bi-directional relationship between remittances and the exchange rate.
Finally, we study the business cycle characteristics of remittances. If remittances are anti-cyclical then receiving countries can use remittances to offset negative cyclical fluctuations in output. On the other hand, if remittances are procyclical then remittances cannot offset cyclical fluctuations in output. Data from Mexico are used to investigate this issue.
The results using individual level data suggest that remittances respond positively to exchange rate depreciations and negatively to exchange rate uncertainty. Exchange rate depreciation increases the purchasing power of remittances in the receiving country. The results imply that migrants will remit more if there are incentives that make their remittances more valuable in the receiving country. Exchange rate uncertainty reflects the uncertainty related to investments in the receiving country. The results indicate that a decrease in the level of risk of investments in the receiving country will result in more remittances for investment purposes.
The results using macroeconomic level data suggest that there is a bi-directional relationship between remittances and the exchange rate. Moreover, remittances appear to appreciate Mexico's exchange rate. This suggests that remittances can cause Dutch disease and affect the tradable sector negatively. Also, remittances seem to affect domestic money demand positively. Finally, our results suggest that remittances are countercyclical.
For Future Students | For Current Students | For Faculty and Staff | About The Graduate College
Events | Policies/Guidelines | Dissertation Defenses | ETD | Forms
Updated July 10, 2006
Copyright © 2002-2004, Western Michigan University
The Graduate College, 260 W. Walwood Hall, Kalamazoo, MI 49008-5456 Phone: 269 387-8212