Purpose – Traditionally, remittances have been analyzed in the context of their socioeconomic impact on the receiving communities. Consequently, little is known about the macroeconomic factors that influence their behavior. This paper aims to evaluate the importance of several macroeconomic indicators on the flow of remittances from the USA to El Salvador.Design/methodology/approach – The analysis considers cointegration and common cycle tests. It includes as explanatory variables gross domestic product (GDP) and the interest rates differential in El Salvador, employment in California, and M2 as a measure of the stance of US monetary policy. These variables are intended to capture macroeconomic conditions in the host and home countries.Findings – The study finds that all variables share a common trend and a common cycle with remittances; though the association with the interest rates differential in the short‐run is weak. That is, remittances respond significantly to transitory and permanent changes in ma...
