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The real exchange rate and the balance of trade in US tourism

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  • Cheng, Ka Ming
  • Kim, Hyeongwoo
  • Thompson, Henry

Abstract

This paper investigates the effects of the real exchange rate and income on US tourism export revenue and import spending with quarterly data for the floating exchange period from 1973 to 2010. Separate estimates of export revenue and import spending functions prove more revealing than estimates of the trade balance. Vector autoregressions capture dynamic adjustments to exchange rate and income shocks. Depreciation raises US tourism export revenue but does not affect import spending. US tourists going abroad respond to income while foreign tourists coming to the US do not.

Suggested Citation

  • Cheng, Ka Ming & Kim, Hyeongwoo & Thompson, Henry, 2013. "The real exchange rate and the balance of trade in US tourism," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 122-128.
    • Handle: RePEc:eee:reveco:v:25:y:2013:i:c:p:122-128
    DOI: 10.1016/j.iref.2012.06.007
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    3. Menna Bizuneh, 2022. "Are We Floating Yet? Duration of Fixed Exchange Rate Regimes," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 48(1), pages 63-89, January.
    4. Seetaram, Neelu & Forsyth, Peter & Dwyer, Larry, 2016. "Measuring price elasticities of demand for outbound tourism using competitiveness indices," Annals of Tourism Research, Elsevier, vol. 56(C), pages 65-79.
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    7. Li, Richard (Ziyuan), 2017. "An Analysis of the Impact of RMB Depreciation on Hong Kong," Studies in Applied Economics 83, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
    8. Irandoust, Manuchehr, 2019. "On the relation between exchange rates and tourism demand: A nonlinear and asymmetric analysis," The Journal of Economic Asymmetries, Elsevier, vol. 20(C).
    9. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah & Hegerty, Scott W., 2014. "Industry trade and exchange-rate fluctuations: Evidence from the U.S. and Chile," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 619-626.
    10. Cheng, Ka Ming, 2020. "Currency devaluation and trade balance: Evidence from the US services trade," Journal of Policy Modeling, Elsevier, vol. 42(1), pages 20-37.
    11. Cao, Zheng & Li, Gang & Song, Haiyan, 2017. "Modelling the interdependence of tourism demand: The global vector autoregressive approach," Annals of Tourism Research, Elsevier, vol. 67(C), pages 1-13.
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    13. Ferhat Citak, 2018. "Exchange Rate and Turkish Tourism Trade," International Journal of Economics and Financial Issues, Econjournals, vol. 8(4), pages 206-213.
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    17. Ghosh, Amit, 2014. "A comparison of exchange rate regime choice in emerging markets with advanced and low income nations for 1999–2011," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 358-370.
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    More about this item

    Keywords

    Trade balance; Real exchange rate; Tourism; J-curve; Vector autoregression;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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