Figure 1. Response of Remittances after a Shock to the Exchange Rate. .06 .04 .02 .00 -.02 5 10 15 20 25 Note: Ranges represent two-standard deviation confidence intervals. Figure 2. Response of the Exchange Rate after a Shock to Remittances. .01 .00 -.01 -.02 -.03 5 10 15 20 25 Note: Ranges represent two-standard deviation confidence intervals. Figure 3. Response of Domestic Money Demand after a Shock to Remittances. .020 .015 .010 .005 .000 -.005 5 10 15 20 25 Note: Ranges represent two-standard deviation confidence intervals. Figure 4. Response of Demand for U.S. Dollars after a Shock to Remittances. .02 .00 -.02 -.04 -.06 5 10 15 20 25 Note:. Ranges represent two-standard deviation confidence intervals. Table 1. Remittances by Year and Transmission Method (Billions of U.S. dollars). Year Total Family Remittances Amount 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 (up to November) Average (excluding 2006) Growth Rate Money Orders Electronic Transfers Amount Growth Rate % of Total Amount Growth Rate % of Total (1) 4.2 4.9 5.6 5.9 6.6 8.9 9.8 13.4 16.6 20.0 21.3 (2) 14.0 14.1 14.6 4.9 10.6 30.3 9.8 31.1 21.5 18.7 16.5 (3) 1.5 1.7 1.9 1.5 1.4 0.8 0.7 1.6 1.9 1.9 1.3 (4) 4.3 12.9 7.9 -25.6 -1.0 -58.0 -15.7 86.0 14.9 -0.9 -26.6 (5) 36.0 35.5 33.3 24.5 21.8 9.0 7.0 12.1 11.3 9.3 5.9 (6) 2.2 2.6 3.3 3.9 4.6 7.8 8.8 11.5 14.5 17.9 19.8 (7) 16.1 17.2 20.9 19.1 16.5 51.7 12.3 26.9 23.0 21.1 20.6 (8) 52.6 54.2 57.8 66.6 70.6 87.5 89.6 85.9 87.3 89.3 92.8 9.6 17.0 1.5 2.5 20.0 7.7 22.5 74.1 Note: Transmission methods not reported include checks, cash and in-kind transfers. The amount reported for the year 2006 includes data until November only; as such the comparison period used to construct the growth rate is January 2005 – November 2005 and January 2006 – November 2006. Table 2. Variance Decomposition of Remittances. Horizon 6 12 24 36 48 USY (1) 27.9 (13)* 32.3 (13.2)* 34.0 (14.8)* 37.1 (15.2)* 39.9 (16.1)* Y (2) 3.8 (5.1) 5.9 (6.2) 6.5 (7.3) 6.8 (8.1) 7.6 (9.5) Q (3) 51.5 (18.3)* 41 (16.5)* 28.5 (9.9)* 22.0 (9.8)* 17.8 (9.2) I-I* (4) 2.0 (4.7) 6.7 (5.4) 7.3 (6.1) 8.4 (6.5) 9.2 (7.7) R (5) 11.7 (11.9) 11.2 (10.4) 10.1 (9.9) 9.7 (8.8) 8.6 (8.7) M (6) 3.1 (5.1) 2.9 (6.2) 13.6 (7.4) 16 (8.4) 16.9 (9.0) Note: A * indicates that the point estimate is at least twice as large as its standard error. Table 3. Variance Decomposition of the Real Exchange Rate. Horizon 6 12 24 36 48 USY (1) 18.7 (9.1)* 16.4 (11.1) 15.3 (10.4) 12.5 (8.9) 11.1 (9.2) Y (2) 3.2 (7.5) 2.8 (7.1) 2.1 (6.6) 1.7 (5.9) 1.3 (5.2) Q (3) 13.8 (6.7)* 11.2 (7.9) 9.6 (6.2) 7.8 (5.1) 6.4 (4.9) I-I* (4) 5.3 (11) 5.1 (12.2) 4.6 (13.2) 4.1 (13.9) 3.5 (14.3) R (5) 47.1 (17)* 43.1 (18.2)* 36.2 (17.4)* 32.9 (16.2)* 27.8 (17.1) Note: A * indicates that the point estimate is at least twice as large as its standard error. M (6) 11.9 (9.7) 21.4 (10.4)* 32.2 (13)* 41 (15.9)* 49.9 (17.8)* Table 4. Variance Decomposition of M in Pesos. Horizon 6 12 24 36 48 USY (1) 4 (5.1) 6.2 (7.2) 8.4 (8.5) 11.5 (9.1) 13.9 (11.2) Y (2) 7.9 (7.7) 9.6 (8.1) 11.8 (8.8) 12.8 (9.5) 14.1 (10.4) Q (3) 1.7 (3.8) 2.7 (4.6) 3.1 (5.3) 3.7 (6.6) 4.2 (7.3) I-I* (4) 37.1 (16.4)* 35.5 (17.1)* 29.3 (17.4) 23.7 (17.7) 21.5 (18.4) R (5) 27.4 (13.9) 33.8 (14.6)* 37.9 (17.2)* 42.2 (19.3)* 43.7 (19.8)* M (6) 21.9 (11.7) 12.2 (13.1) 9.5 (14.2) 6.1 (15.0) 2.6 (16.2) Note: A * indicates that the point estimate is at least twice as large as its standard error. Table 5. Variance Decomposition of M in U.S. Dollars. Horizon 6 12 24 36 48 USY (1) 4.7 (5.9) 6.1 (7.7) 7.3 (9.0) 9.2 (9.7) 11.9 (11.4) Y (2) 44.8 (22.1)* 40.7 (20.0)* 38.8 (18.6)* 36.5 (17.9)* 34.1 (17.1) Q (3) 3.3 (6.9) 4.7 (7.2) 5.3 (7.9) 5.8 (9.6) 7.0 (13.4) I-I* (4) 8.1 (7.4) 9.7 (10.2) 12.6 (14.4) 13.8 (17.7) 16.9 (18.0) R (5) 13.6 (9.8) 12.8 (8.8) 11.4 (7.9) 10.9 (7.6) 10.1 (6.7) Note: A * indicates that the point estimate is at least twice as large as its standard error. M (6) 25.5 (17.4) 26.0 (18.2) 24.6 (19.3) 23.8 (22.8) 20.0 (24.0)