Impact of the Covid19 Pandemic on Remittances to Mexico

Abstract

This paper seeks to show the impact of the COVID-19 pandemic on remittances from the United States to Mexico. Using monthly data from January 2014 to May 2021, it shows that there is a structural break in the long and short run equations that explain remittances. Using evidence from orthogonalized impulse response functions, we find that before COVID 19 there was evidence in favor of the altruistic, the risk sharing and the investment motive hypotheses for sending remittances. During the COVID 19 period, there is evidence that remittances became more a necessity reducing space for investment motives and the preferences of the sender households and increasing the role of the risk sharing motive. The main limitation of the study is that we do not show results specific to remittances corridors due to the lack of data. Further research is needed to understand if the COVID 19 has long run impacts over the remittance flow and the usage that receiving households give to the remittances.