The Tale of Three Amigos: Remittances, Exchange Rates, and Money Demand in Mexico |
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| Authors: | Carlos Vargas-Silva |
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| Institution: | Department of Economics and International Business, Sam Houston State University, Huntsville |
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| Abstract: | The author analyzes the relationship between remittances, exchange rates, and money demand in Mexico. He finds that shocks to remittances have a positive impact on domestic money demand. The results also suggest the existence of a bi-directional relationship between remittances and the exchange rate. Furthermore, positive shocks to remittances are found to have a negative impact on Mexico's real exchange rate. This indicates that remittances appreciate the Mexican peso and therefore may impact on the competitiveness of the tradable sector negatively. |
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