Minicase3 Answer
Global Remittances
1.
Where are remittances across borders included within the balance of payments? Are they current or financial account components?
• The United States Bureau of Economic Analysis (BEA), which is responsible for the compilation of U.S. balance of payments statistics, classifies migrant remittances as "current transfers" in the current account.
• Wider definitions of remittances may also include capital assets which migrants take with them to host countries, and similar assets which they bring back with them to their home countries (generally classified as capital account transactions).
• Transfers back to their home country made by individuals who may be working in a country (for example an expat working for an MNE) but not considered ‘residents’, may also be considered global remittances under current transfers in the current account.
Global Remittances
2.
Under what conditions are remittances significant contributors to the economy and overall balance of payments?
• With the growth in global remittances has come a growing debate as to what role they do or should play in a country’s balance of payments , and more importantly, economic development.
• In some cases, like India, there is growing resistance from the central bank and other banking institutions to allow online payments services like PayPal to process remittances.
• In other countries like Honduras, Guatemala, and Mexico there is growing debate on whether the remittances flow to families or are actually payments to a variety of Central American smugglers – human trafficking smugglers.
Global Remittances
3.
What role do remittances play in the economy of a country like Mexico?
• Many remittances represent earnings generated by migrant workers in industrialized countries which are being remitted to family and friends in emerging market countries. It therefore represents often critical income for the receiving parties, but only after what are often considered exploitive fees and
1.
Where are remittances across borders included within the balance of payments? Are they current or financial account components?
• The United States Bureau of Economic Analysis (BEA), which is responsible for the compilation of U.S. balance of payments statistics, classifies migrant remittances as "current transfers" in the current account.
• Wider definitions of remittances may also include capital assets which migrants take with them to host countries, and similar assets which they bring back with them to their home countries (generally classified as capital account transactions).
• Transfers back to their home country made by individuals who may be working in a country (for example an expat working for an MNE) but not considered ‘residents’, may also be considered global remittances under current transfers in the current account.
Global Remittances
2.
Under what conditions are remittances significant contributors to the economy and overall balance of payments?
• With the growth in global remittances has come a growing debate as to what role they do or should play in a country’s balance of payments , and more importantly, economic development.
• In some cases, like India, there is growing resistance from the central bank and other banking institutions to allow online payments services like PayPal to process remittances.
• In other countries like Honduras, Guatemala, and Mexico there is growing debate on whether the remittances flow to families or are actually payments to a variety of Central American smugglers – human trafficking smugglers.
Global Remittances
3.
What role do remittances play in the economy of a country like Mexico?
• Many remittances represent earnings generated by migrant workers in industrialized countries which are being remitted to family and friends in emerging market countries. It therefore represents often critical income for the receiving parties, but only after what are often considered exploitive fees and