Remittances and COVID-19: A Tale of Two Countries
Looking at the effects of the COVID-19 pandemic on workers' remittances flowing from the United States, this article focuses on the experiences of two countries, El Salvador and Mexico, which account for approximately 30 percent of all immigrants currently residing in the United States. Following the second quarter's economic lockdown, transfers to these countries experienced perplexing dynamics. Specifically, remittances to El Salvador witnessed a record 40 percent sudden drop, while Mexico recorded an unexpected 35 percent increase. We discuss some of the narratives proposed to explain this puzzling evidence and propose some alternative hypotheses.
- During the COVID-19 lockdown remittances to El Salvador registered a record fall. Conversely, Mexico witnessed a record increase in these transfers.
- The historical evidence does not appear to support the hypothesis that the sharp depreciation of the Mexican peso, in contrast with the fully dollarized Salvadoran economy, explains these results.
- The ongoing U.S. housing boom and the uncertainty regarding the refugee status of Salvadoran workers may help to explain some of this evidence.
Center Affiliation: Center for Quantitative Economic Research and the Americas Center
JEL classification: F40, F41, O10
Key words: Remittances, COVID-19
The Federal Reserve Bank of Atlanta's Policy Hub leverages the expertise of Atlanta Fed economists and researchers to address issues of broad policy interest. Our research centers coordinate this work and seek to influence policy discussions. Areas of interest include: forecasting, fiscal policy, and macroeconomics (Center for Quantitative Economic Research); financial stability, innovation, and regulation (Center for Financial Innovation and Stability); human capital, labor markets, health, and education (Center for Human Capital Studies); and government-sponsored entity reform, mortgage markets, and affordable housing (Center for Housing and Policy). Sign up for email updates. Under "Publications" select "Policy Hub."