The Fed, Remittances, and Economic Cycles: A Cross-Border Perspective

The flow of remittances is shaped by the broader macroeconomic landscape of both the sending and receiving nations. This paper delves into the overlooked impact of U.S. monetary policy on remittance transfers to Latin America and the Caribbean. Employing panel local projections across eight recipient countries, we uncover a pronounced and statistically significant decline in remittance inflows following unexpected shifts in U.S. monetary conditions. Our findings remain consistent across different sample periods and when accounting for additional factors. This study, therefore, introduces a remittance-based transmission channel through which Federal Reserve policies reverberate across global economic cycles.