Remittances Payments through Central Banks: An Application to the Central American Countries Exchange Rates

This paper analyzes the effect on the level and volatility of the Central American countries' exchange rates of transferring remittances through central banks. Given the importance of remittances for these economies, transferring a percentage of remittances through central banks diminishes the supply of dollars in the local currency market. This reduces the volatility and depreciates slightly the exchange rate, along with the need of the central bank to intervene in the currency market.