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A General Equilibrium Analysis of the Economic Impact of a Devaluation on Tourism: The Case of Fiji

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  • Stephen Pratt

    (School of Hotel and Tourism Management, Hong Kong Polytechnic University, 17 Science Museum Road, TST East, Kowloon, Hong Kong)

Abstract

Policymakers often see a currency devaluation as a means of increasing a country's exports, providing a boost to economic activity. In an economy where tourism exports are significant, a devaluation will make tourism more competitive, providing a stimulus to the economy through tourism exports. Imports will be more expensive, which is often seen as an inflationary side-effect of the export stimulus. Results from a computable general equilibrium model of Fiji indicate that, while devaluation will increase tourism consumption, the overall effect on the economy will be contractionary, as household consumption, investment and domestic production will all decrease. Policymakers and central banks need to consider the full economy-wide impacts of a currency devaluation when determining the overall benefit to the economy.

Suggested Citation

  • Stephen Pratt, 2014. "A General Equilibrium Analysis of the Economic Impact of a Devaluation on Tourism: The Case of Fiji," Tourism Economics, , vol. 20(2), pages 389-405, April.
    • Handle: RePEc:sae:toueco:v:20:y:2014:i:2:p:389-405
    DOI: 10.5367/te.2013.0274
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    References listed on IDEAS

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    Cited by:

    1. Wenming Shi & Meifeng Luo & Mengjie Jin & Seu Keow Cheng & Kevin X. Li, 2020. "Urban–rural income disparity and inbound tourism: Spatial evidence from China," Tourism Economics, , vol. 26(7), pages 1231-1247, November.
    2. Balsalobre-Lorente, Daniel & Driha, Oana M. & Sinha, Avik, 2020. "The dynamic effects of globalization process in analysing N-shaped tourism led growth hypothesis," MPRA Paper 100078, University Library of Munich, Germany.
    3. Pablo Ponce & Nathalie Aguirre-Padilla & Cristiana Oliveira & José Álvarez-García & María de la Cruz del Río-Rama, 2020. "The Spatial Externalities of Tourism Activities in Poverty Reduction," Sustainability, MDPI, vol. 12(15), pages 1-17, July.
    4. Ann-Ni Soh & Chin-Hong Puah & M. Affendy Arip & Tai-Hock Kuek, 2019. "Oil Price and Fijian Tourism Cycle: A Markov Regime-switching Model," International Journal of Energy Economics and Policy, Econjournals, vol. 9(6), pages 188-192.
    5. Pratt, Stephen, 2015. "The economic impact of tourism in SIDS," Annals of Tourism Research, Elsevier, vol. 52(C), pages 148-160.
    6. Ronal Chand & Rup Singh & Sumeet Lal & Nilesh Chand & Devendra Kumar Jain, 2022. "Determinants of Exports in a Small and Vulnerable Economy: Fiji Islands—A Disaggregated Analysis," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(6), pages 2948-2969, December.

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