THE IMPACT OF THE US RECESSION ON IMMIGRANT REMITTANCES IN CENTRAL AMERICA

The United States (US) economic recession has considerably affected employment among its immigrant Hispanic community, and as a consequence, remittances to Central America have plunged more than in any other region in the world. This paper provides evidence that the US housing crisis and the subsequent economic recession have affected the Central American region's Gross Domestic Product (GDP) beyond the traditional means of exports, exchange rates, and interest rates, namely, through remittances as well. Using a Vector Autoregression (VAR) model, we examine the case of El Salvador and find that major disturbances to the US economy have an immediate and substantial impact on remittances to this Central American nation.