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The purpose of this study is to examine two issues about remittances in Central American countries (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua). First, whether the inflow of remittances impacts income in the long run. Second, what motivates migrants to send remittances? The first issue is analyzed in the context of a permanent income hypothesis, while the second is analyzed in the context of altruism versus self-interest motives.

A panel cointegration method is used to establish the long-run relationship between the variables under consideration. Further, this study uses the fully modified ordinary least squares method (FMOLS) to estimate the impact of remittances on income and consumption. The pooled mean group (PMG) estimation is used.

The test results indicate that remittances into Central American countries do not promote growth in the long run. Central American families may perceive remittances as a permanent income stream and will increase their current consumption. Additionally, the test results indicate that sending remittances of the Central American migrants is mainly driven by altruism. Their primary motive is to support left-behind families at times of economic hardship.

Findings provide an important implication for these Central American countries, as they have potential to boost income by utilizing remittance money in productivity-enhancing activities. This study could also provide valuable information for the governments of labor-exporting countries around the world to encourage and incentivize remittance recipient families to utilize those funds for income-generating activities.

In Central America, this is probably the first attempt in the literature to analyze the impact of remittances in the context of permanent income hypothesis and the motivation of Central American workers to send remittances to their countries of origin.

This paper aims to investigate the relationship between output and unanticipated inflation when wages are indexed for the loss of purchasing power. The authors argue that the monetary authority remains useful when firms that face rigid demand index wages to compensate for the loss of purchasing power, unlike Fischer (1977), who suggested that monetary policy loses effectiveness when firms index wages.

This paper develops a simple theoretical model followed by an empirical investigation of the relationship between output and unanticipated inflation in the presence of indexation. The theoretical model assumes a perfectly competitive firm that produces a final good that has no close substitutes using one factor, labor. The demand for the product is rigid. The empirical work considers quarterly US data from 1982Q1 to 2017Q1 and uses the Generalized Method of Moments in which endogenous variables are instrumented using their own lags. This paper further considers the period before and after the recent global financial crisis.

This paper shows that unexpected inflation decreases the growth rate of output in the USA. The decrease is quantitatively and qualitatively stronger before the financial crisis than after the crisis. This finding suggests that the Federal Reserve should maintain higher expectations of inflation and then surprise the public with lower inflation rates. The results further suggest that regardless of how expectations are formed, firms and workers agree on the nominal wage that is equal to the realized marginal revenue product of labor.

This paper sheds light on the behavior of the central bank and its relative ineffectiveness in light of the recent economic recession.

The purpose of this paper is to examine whether remittances induce inflation in South Asian countries, namely, Bangladesh, India, Nepal, Pakistan and Sri Lanka.

This study uses panel cointegration and Pooled Mean Group techniques covering from 1975 to 2017 to estimate the long-run and the short-run effect of remittances on inflation.

The estimated results suggest that the inflationary impact of remittances in South Asia depends on the time length. The inflow tends to lower inflation in the short run, whereas it increases in the long run. The findings highlight the regional peculiarity in the impact of remittances on the price level. The results are statistically significant and are confirmed by the Mean Group estimation as well.

Most past studies investigating the nexus between remittances and inflation in the South Asian context examine either these countries individually or include them all in a pool of big cross-sections. This study contributes to the literature by addressing this void. The South Asian countries should not generalize the earlier findings on the link between remittance inflows and inflation, as the short-run effect is different from the long run. Thus, these countries would be better off designing long-run policies that are different from the short run.