Digital Money and Remittances Costs in Central America, Panama, and the Dominican Republic

29 Pages Posted: 21 Dec 2022

See all articles by Alina Carare

Alina Carare

International Monetary Fund (IMF)

Lavinia Franco

Bayes Business School (formerly Cass), City, University of London

Metodij Hadzi-Vaskov

International Monetary Fund (IMF)

Justin Lesniak

International Monetary Fund (IMF)

Dmitry Vasilyev

International Monetary Fund (IMF)

Yorbol Yakhshilikov

International Monetary Fund (IMF)

Abstract

This paper investigates factors that predict variation in digital and non-digital remittance fees over time and across countries, exploring differences between CAPDR and other regions. The paper fills a void in the literature on how country- and corridor-specific factors relate to remittance fees at different levels of digitalization of the transaction mode. It also complements stylized facts and regression analysis with a survey analysis of the CAPDR authorities’ views on the latest developments, possibilities, and risks related to digital remittances with a view to gauging the authorities’ potential role in further reducing the cost of cross-border payments more generally and remittances fees in particular. The paper finds a clear trend of declining remittance fees across countries and at any level of digitalization, albeit they remain higher for CAPDR countries relative to non-CAPDR countries. More competition, financial and digital development in receiving countries—such as debit/credit card ownership or bank branch penetration—are associated with lower remittance fees, especially in CAPDR. The surveyed authorities actively explore the use of digital money to advance domestic payment systems, expedite financial inclusion, and lower remittances fees, yet see considerable risks, especially for preserving monetary sovereignty in CAPDR.

Keywords: Digital money, cryptocurrency, stablecoin, remittances

JEL Classification: E50, E58

Suggested Citation

Carare, Alina and Franco, Lavinia and Hadzi-Vaskov, Metodij and Lesniak, Justin and Vasilyev, Dmitry and Yakhshilikov, Yorbol, Digital Money and Remittances Costs in Central America, Panama, and the Dominican Republic. IMF Working Paper No. 2022/238, Available at SSRN: https://ssrn.com/abstract=4308645 or http://dx.doi.org/10.5089/9798400225895.001

Alina Carare (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Lavinia Franco

Bayes Business School (formerly Cass), City, University of London ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Metodij Hadzi-Vaskov

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Justin Lesniak

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Dmitry Vasilyev

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Yorbol Yakhshilikov

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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