Asymmetric effects of third-country exchange rate risk: A Markov switching approach

Woraphon Yamaka, Xuefeng Zhang, Paravee Maneejuk and Vicente Ramos

Annals of Tourism Research, 2023, vol. 103, issue C

Abstract: The standard tourism demand models consider the effects of the bilateral real exchange rate between origin and destination in a linear context. Our study contributes to the literature by incorporating the asymmetric effects of real exchange rate volatility of home and third-countries. We propose a Markov Switching ARDL model to estimate outbound tourism demand over the period of 2002–2019. This model allows us to examine both the short- and long-run effects in the likely presence of asymmetric effects and structural breaks. The results reveal that there are nonlinear asymmetric long- and short-run effects of the third-countries exchange rate volatility. We also identify relevant structural changes coinciding with major events.

Keywords: Third-countries exchange rate volatility; Chinese outbound tourism; Nonlinear short- and long-run effects; Markov Switching Autoregressive Distributed Lag (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:anture:v:103:y:2023:i:c:s0160738323001494

DOI: 10.1016/j.annals.2023.103676

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