Short-run macroeconomic determinants of remittances to Jamaica: a time varying parameter approach

Abstract

This article uses a time varying parameter model (TVP) to examine the macroeconomic determinants of cash remittances to Jamaica over the period January 1983 to April 2001. We anticipated a positive relationship between changes in remittances and foreign income. We find an investment component in the relationship between changes in remittances and domestic income. In addition, the relationship between changes in remittances, the unofficial exchange rate premium and the exchange rate differential are in line with our expectations. In terms of the policy dimension of the results, it is clear that domestic policy has a significant impact on the responses of remitters. These responses do not merely reflect altruistic concerns for relatives but also investment related considerations. This means that policy makers might be able, through deliberate policy, to influence the flow of remittances over time.