Exchange-rate uncertainty and workers' remittances

A panel of nine Western Hemisphere nations is employed to test the proposition that the remittances of immigrants respond to risk variables, in particular to exchange-rate uncertainty. To estimate annual exchange-rate uncertainty, a nonparametric estimator based on monthly exchange rate returns is used. Also the instrumental variables procedure of Pagan and Ullah (Journal of Applied Econometrics, 3, 87-105, 1988) is employed to insure that the conclusions are robust to possible error in the measurement of exchange-rate uncertainty. The results give credence to the 'new economics of migration' approach which argues that immigrants are highly motivated by portfolio variables.