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Aleksandra Babii, Ms. Alina Carare, Dmitry Vasilyev, and Mr. Yorbol Yakhshilikov

capturing well the pre-pandemic and the first half of 2020 in remittances dynamics, fail to predict the strong rebound since June 2020. The rebound was faster and stronger than the improvement in the U.S. Hispanic unemployment, a variable that explained well in the past the behavior of aggregate remittances to the region. Second, decomposing the remittances data to the region into volume of transactions and average amount remitted, we observe that the pre-pandemic upward trend in aggregate remittances in the region is explained entirely by the continuous increases in the

Aleksandra Babii, Ms. Alina Carare, Dmitry Vasilyev, and Mr. Yorbol Yakhshilikov
Traditional models relying on standard variables like the U.S. Hispanic unemployment rate fared well in explaining remittances to CAPDR and Mexico during the pre-pandemic period. However, they fail to predict the sustained growth in remittances since June 2020, including the significant increase in the average amount remitted. Using data from over 300 remittances corridors (from 23 U.S. states to 14 Salvadoran departments), we find that this increase is primarily explained by the dynamics of U.S. states real wages, as well as more temporary factors like U.S. unemployment relief (including the extraordinary pandemic support), U.S. states mobility, and COVID-19 infections at home. The paper also analyses what role the change in the modes of transmission of remittances, additional U.S. fiscal stimulus and U.S. labor market developments, especially in the sectors were CAPDR and Mexican migrants preponderantly work, play in explaining aggregate remittances growth.
Aleksandra Babii, Ms. Alina Carare, Dmitry Vasilyev, and Mr. Yorbol Yakhshilikov

: COVID-19 pandemic, migrant remittances, international migration Authors’ E-Mail Addresses: ABabii@imf.org , ACarare@imf.org , DVasilyev@imf.org , YYakhshilikov@imf.org Contents I. INTRODUCTION II. LITERATURE REVIEW III. STYLIZED FACTS A. Migration and Remittances B. Evolution of Remittances C. Comparing Evolution of Remittances in 2020 with Previous Recessions D. Comparing Evolution of Remittances in 2020 and 2021 with Other Regions IV. EXPLAINING REMITTANCES DYNAMICS WITH A TRADITIONAL MODEL A. Cross-Country Model of

Stephen Snudden

Front Matter Page Research Department Contents I. Introduction II. Literature Review III. A Multilateral Model of Remittances A. Non-Technical Overview of the Model B. Non-Technical Overview of Remittances in FSGM C. Technical Overview of Remittances in FSGM 1. Consumption 2. Labor Demand and Supply 3. Balance of Payments and Potential Output IV. Calibration of Remittances and Migration in FSGM A. Structural Estimation of Remittance Dynamics 1. Russia 2. Saudi Arabia 3. Summary of Structural Estimation Results

Stephen Snudden

model of migration and international remittance flows. Section IV proposes a method to estimate remitter dynamics using structural vector auto regressions and the calibration strategy of the structural model. Section V conducts scenario analysis using the general equilibrium structural model. Section VI discusses the implications of the analysis of the structural model for the identification of the motive to remit and migrate. Section VII concludes. II. Literature Review The empirical literature on remittance dynamics has primarily focused on the relationship

Stephen Snudden
This paper adds international migration and remittances into the IMF’s Flexible System of Global Models (FSGM). FSGM is a global general equilibrium model with endogenous primary commodity markets. A method to estimate the structural dynamics of major remitter regions is proposed. The dynamics of remittances and migration in FSGM are calibrated to be consistent with the main stylized facts of the empirical estimates. Structural disturbances pertinent to current global remittance flows are examined. These disturbances include disruptions to oil supply, output variation in Europe and the United States, labor nationalization policies in Saudi Arabia, and a global reduction in the cost to remit. The multilateral framework illustrates how remittance inflows need not originate from the region with the underlying economic disturbance but can arise from third party remitter regions affected by global commodity markets. The results also illustrate that the correlation of remittance inflows and the real GDP of labor-exporting economies can be either positively or negatively correlated. The evidence suggests that the behavioral incentive to migrate and remit cannot be deduced from correlations of real GDP and remittance inflows.
Ms. Kimberly Beaton, Ms. Svetlana Cerovic, Misael Galdamez, Metodij Hadzi-Vaskov, Franz Loyola, Zsoka Koczan, Mr. Bogdan Lissovolik, Mr. Jan Kees Martijn, Ms. Yulia Ustyugova, and Joyce Wong
Outward migration has been an important phenomenon for countries in Latin American and the Caribbean (LAC), particularly those in Central America and the Caribbean. This paper examines recent trends in outward migration from and remittances to LAC, as well as their costs and benefits. For the home country, the negative impact from emigration on labor resources and productivity seems to outweigh growth gains from remittances, notably for the Caribbean. However, given emigration, remittance flows play key financing and stabilizing roles in Central America and the Caribbean. They facilitate private consumption smoothing, support financial sector stability and fiscal revenues, and help reduce poverty and inequality, without strong evidence for harmful competitiveness effects through shifts in the real exchange rate.
Ms. Kimberly Beaton, Ms. Svetlana Cerovic, Misael Galdamez, Metodij Hadzi-Vaskov, Franz Loyola, Zsoka Koczan, Mr. Bogdan Lissovolik, Mr. Jan Kees Martijn, Ms. Yulia Ustyugova, and Joyce Wong

America Carribbean Mexico Central America, Panama, and the Dominican Republic Revenue/GDP Remittances/GDP 1.152** 0.676 0.440 0.251 3.190 1.157** 1.303** 0.393** (0.496) (0.749) (0.311) (0.489) (2.136) (0.558) (0.546) (0.156) Number of obs . 2362 619 568 399 221 169 24 154 Adjusted R2 0.790 0.845 0.657 0.632 0.371 0.540 0.782 0.821 Changes in remittances dynamics have significantly impacted revenue developments in some country sub