August 17, 2021
News /
Posted by NCID

Remittances from abroad account for an average of 10% of GDP in the Central American region, an important source of income despite varying drastically between countries –– in El Salvador it represented 20.9% of GDP while in Costa Rica it was 0.84% in 2019––. The economic importance of remittances means that unforeseen external phenomena such as the coronavirus pandemic put the expected income of the Central American nations at risk. A reliable model is necessary to be able to project the flow of remittances and reduce uncertainty for the monetary authorities and national budgets of countries, as well as for investors and other economic agents.

The researcher at the Centro de Investigación para el Desarrollo Regional (CINDERE), Luis Rodrigo Asturias Schaub, has carried out an investigation to find the model that best suits each country. The results are shown in the scientific article that he publishes as co-author in number 11 of the Journal of Economic Profiles of the University of Valparaíso de Chile: Family Remittances and COVID-19: Efficiency in Forecasting to Reduce Speculation in the Central American region. In it, he uses the ARIMA prediction model and the SARIMA seasonal derivative to predict the behavior of remittances and discovers that the forecast deviates from the real value by an average 8.4% and less than one standard deviation.

In any case, despite an initial reduction in the flow at the beginning of the pandemic, the real value has been higher on average than the forecast, which indicates that remittances are robust and shows the connection between Central Americans living abroad, mainly in United States, with their country of origin.

You can visit this and other publications on the CINDERE website.