Reviewing the factors driving demand for regional tourism in Uruguay

Sofía Domingorena () and Gabriela Mordecki
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Sofía Domingorena: Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Estadística

No 05-26, Documentos de Trabajo (working papers) from Instituto de Economía - IECON

Abstract: Tourism is a key driver of Uruguay's economy, accounting for around 9% of GDP and 7% of total employment. Argentina and Brazil are the main source markets, together accounting for approximately 70% of total tourism demand. This paper reviews recent evidence on the long-run relationship between tourism demand, income, and the real exchange rate using vector error correction models (VECM), estimated separately for Argentina and Brazil from January 2005 to June 2025. An uncertainty measure is also incorporated to assess its potential effects. The results show that Argentine tourism demand responds to both income and relative prices, with an income elasticity close to 4, confirming tourism as a luxury good, while uncertainty has no significant effect. In contrast, Brazilian demand is driven exclusively by income, with an elasticity close to 3, and uncertainty behaves as an exogenous factor. Forecasts suggest that Argentine tourism would grow by 8% in 2025 and 8.5% in 2026, while Brazilian tourism is projected to increase by 12% and 9%, respectively. Impulse response functions indicate strong income effects in both markets, with faster short-run adjustment in Argentina (three months) than in Brazil (about one year).

Keywords: Tourism demand; Real exchange rate; Cointegration (search for similar items in EconPapers)
JEL-codes: C32 L83 Z32 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2026-03
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https://hdl.handle.net/20.500.12008/53897

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Persistent link: https://EconPapers.repec.org/RePEc:ulr:wpaper:dt-05-26

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