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Interrelationships between Tourist Arrivals, Exchange Rate, Inflation, and Economic Growth: Empirical Evidence for Turkiye

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  • Gulsum Akarsu

    (Ondokuz Mayıs University, Faculty of Economic and Administrative Sciences, Political Science and Public Administration Department)

Abstract

Touristic activities have become essential for sustainable development associated with countries' prosperity and mobility opportunities. These activities may be affected by the exchange rate, economic growth, and general price movements, and these variables may also be affected by tourism activities. This study analyzes the relationships between tourist arrivals, economic growth, inflation, and exchange rate for Türkiye taking the country's geopolitical risk as exogenous, using monthly data over 2008-2020 and a Vector Error Correction modelling approach. The results indicate favorable short-run and long-run impacts of tourist arrivals on economic growth and confirm the validity of the tourism-led growth hypothesis for Türkiye. Toda Yamamoto causality tests show unidirectional causality from economic growth to inflation and exchange rate fluctuations and from the exchange rate to inflation. Therefore, results do not show evidence of tourism’s Dutch disease effect. Improving the quality of tourism-related services and marketing is vital for revenue increase and, thus, economic growth.

Suggested Citation

  • Gulsum Akarsu, 2023. "Interrelationships between Tourist Arrivals, Exchange Rate, Inflation, and Economic Growth: Empirical Evidence for Turkiye," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 9(1), pages 49-76, June.
    • Handle: RePEc:ana:journl:v:9:y:2023:i:1:p:49-76
    DOI: 10.22440/wjae.9.1.3
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    More about this item

    Keywords

    Tourist arrivals; Tourism-led growth; Inflation; Exchange rate; Geopolitical risk;
    All these keywords.

    JEL classification:

    • Z32 - Other Special Topics - - Tourism Economics - - - Tourism and Development
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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