Date of Award

12-2006

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Dr. Susan Pozo

Abstract

In this dissertation we study the determinants and consequences of workers' remittances. It is important 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 impact 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.

In the third chapter of this dissertation we study the determinants of workers' remittances using individual level data. We use data from the Legalized Population Survey and place special emphasis on the impact 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. Given that macroeconomic variables are often endogenous we emphasize the bi-directional relationship between remittances and the exchange rate.

Finally, we study the business cycle characteristics of remittances. If remittances are counter-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. The results imply that migrants will remit more if there are incentives that make their remittances more valuable in the receiving country. The results also indicate that a decrease in the level of risk of investments in the receiving country will result in more remittances.

The results using macroeconomic level data suggest that there is a bi-directional relationship between remittances and the exchange rate. Remittances appear to appreciate Mexico's exchange rate which may result in Dutch disease. Also, remittances seem to impact domestic money demand positively. Finally, our results suggest that remittances are countercyclical.

Access Setting

Dissertation-Open Access

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