On the impact of exchange rate regimes on tourism

Santana-Gallego, María, Francisco Ledesma () and Pérez-Rodríguez, Jorge V.
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Santana-Gallego, María: Universidad de La Laguna
Pérez-Rodríguez, Jorge V.: Universidad de Las Palmas de Gran Canaria

No 07-07, Working Papers from Spanish Chapter of the International Economics and Finance Society

Abstract: The main objective of this paper is to analyze the effect of the exchange rate arrangements on international tourism. The ambiguity of literature about the effect of exchange rate volatility contrasts with the magnitude of the impact of a common currency on trade. On the basis of a gravity equation we estimate a moderate effect of a currency union on tourism of almost 12%. Furthermore, we estimate a gravity equation for international trade, obtaining that the common currency effect on trade is reduced when tourism is introduced as a regressor. This suggests that tourism flows may contribute to explain the excessive magnitude of the estimated effect of a common currency on trade in this literature. Finally, we analyze the impact of several de facto exchange rate arrangements on tourism, finding that less flexible exchange rates promotes tourism flows.

Keywords: Tourism; Exchange Rate Regime; Common Currency (search for similar items in EconPapers)
JEL-codes: G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-tur
Date: Written 2007-12
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