U.S. Presidential Election Cycle and Remittance Transfers of Mexican Immigrants

Abstract

For developing countries international remittances first started exceeding official aid in the mid-1990s and then overtook foreign direct investment in 2019, becoming the biggest source of external financing. National elections constitute a major source of redistribution of political power and policy changes thereafter. However, the effect that national elections in the immigrants’ host country have on remittance transfers has been underexplored by the existing literature. This research was intended to bridge this gap. By analyzing the monthly remittance flows that entered Mexico between 1995 and 2018, it found a cyclical effect of the American presidential electoral process on remittance transfers to Mexico. The primary phase of the election, in particular, was associated with a greater flow of remittances. Interestingly, the effect was not significantly greater in elections involving anti-immigrant candidates such as Donald Trump in the 2016 election. However, it found that remittance flows from the U.S. to Mexico have increased significantly during Trump’s presidency.