Determinants of International Tourism

Alexander Culiuc

No 2014/082, IMF Working Papers from International Monetary Fund

Abstract: The paper estimates the impact of macroeconomic supply- and demand-side determinants of tourism, one of the largest components of services exports globally, and the backbone of many smaller economies. It applies the gravity model to a large dataset comprising the full universe of bilateral tourism flows spanning over a decade. The results show that the gravity model explains tourism flows better than goods trade for equivalent specifications. The elasticity of tourism with respect to GDP of the origin (importing) country is lower than for goods trade. Tourism flows respond strongly to changes in the destination country’s real exchange rate, along both extensive (tourist arrivals) and intensive (duration of stay) margins. OECD countries generally exhibit higher elasticties with respect to economic variables (GDPs of the two economies, real exchange rate, bilateral trade) due to the larger share of business travel. Tourism to small islands is less sensitive to changes in the country’s real exchange rate, but more susceptible to the introduction/removal of direct flights.

Keywords: WP; destination country; goods trade; tourism flow; real exchange rate; International Tourism; Gravity model; Small islands; gravity equation; OECD tourism; tourism arrival; consumption basket; Tourism; Real exchange rates; Trade in goods; Purchasing power parity; Exchange rates; Global (search for similar items in EconPapers)
Pages: 46
Date: 2014-05-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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