Macroeconomic Determinants of Migrant Remittances

Abstract

This paper intends to find out the macroeconomic determinant of migrant workers remittances to Latin America and the Caribbean, and suggest some policy implications. The remittance flows to Latin America and the Caribbean are significant not only because of its absolute terms but also because of its great share of GPD. However, many existing papers have been concentrating on microeconomic determinant of remittances such as altruism, self-interest, or investment motives. Even though many studies have been focused on microeconomic determinants of remittances, the macroeconomic determinants of remittances became an important issue of analysis as a development tool and many studies related to macroeconomic determinants are coming out in seeking of adequate policies. The result of empirical analysis of 32 Latin America and the Caribbean countries covering the period from 1980 to 2010 shows that the economic conditions of both home and host country affects the remittance flows in negative and positive, respectively. Difference of interest rate between home and host countries has a positive effect to the remittances because of the self-interest motivation of migrant workers. The geographical distance between both countries has a negative impact on remittances since the migration cost becomes higher depending on the distance. However, the population density in home country affects the remittance flows to the region positively, because the labor surplus of the home country will try to work overseas. Also, migrant stock in host country has positive impact on remittance, because exiting migrants in host country tend to attract more migration to the country and hence, more remittances. The macroeconomic instability of home country such as high inflation affects the migrant workers remittances to increase.