This article first explores the cyclical dynamics of remittances, and then, analyzes the macroeconomic impact of remittances and the monetary policy implications. In this endeavor, we use the case of the Philippines, one of the countries where remittances are substantial. A dynamic structural quarterly macroeconometric model of the Philippines is used to trace the various channels through which remittances affect the main macroeconomic variables. In the assessment of the impact of the 2008 global financial crisis, we should also consider the remittances as a transmission channel. We have established that remittances are driven by the economic cycle of the main host countries and that the ongoing recession will thus lead to a decline in transfers. Through our model, we have been able to trace the impact of changes in remittances on important economic variables such as aggregate demand, money supply and interest rates, the exchange rate, and labor supply and wages.

Capital flows, Dynamic structural model, Exchange rate, Monetary policy, Remittances
Ensayos Sobre Politica Economica
Erasmus University Rotterdam

Bayangos, V.B, & Jansen, K. (2010). The macroeconomics of remittances in the Philippines. Ensayos Sobre Politica Economica, 61(1), 18–58. Retrieved from