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Devaluation, pass-through and foreign reserves dynamics in a tourism economy

  • Chao, Chi-Chur
  • Lu, Lee-Jung
  • Lai, Ching-Chong
  • Hu, Shih-Wen
  • Wang, Vey

This paper examines the effects of currency devaluations on goods prices and foreign reserves for a small-open economy with inbound tourism. Tourism transforms non-traded goods into exportable goods. Devaluations yield an over pass-through to the prices of the non-traded tourism goods. This may hurt the trade balance and hence lead to a decline in foreign reserves for the economy.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264999312003252
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 30 (2013)
Issue (Month): C ()
Pages: 456-461

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Handle: RePEc:eee:ecmode:v:30:y:2013:i:c:p:456-461
DOI: 10.1016/j.econmod.2012.09.050
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Barhoumi, Karim, 2006. "Differences in long run exchange rate pass-through into import prices in developing countries: An empirical investigation," Economic Modelling, Elsevier, vol. 23(6), pages 926-951, December.
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  4. Junttila, Juha & Korhonen, Marko, 2012. "The role of inflation regime in the exchange rate pass-through to import prices," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 88-96.
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  8. Rudiger Dornbusch, 1985. "Exchange Rates and Prices," NBER Working Papers 1769, National Bureau of Economic Research, Inc.
  9. Yelena Takhtamanova, 2008. "Understanding changes in exchange rate pass-through," Working Paper Series 2008-13, Federal Reserve Bank of San Francisco.
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  11. Stephen J. Turnovsky, 2000. "Methods of Macroeconomic Dynamics, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262201232, March.
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  13. Arize, A. C., 1996. "Cointegration test of a long-run relation between the trade balance and the terms of trade in sixteen countries," The North American Journal of Economics and Finance, Elsevier, vol. 7(2), pages 203-215.
  14. Menon, Jayant, 1995. " Exchange Rate Pass-Through," Journal of Economic Surveys, Wiley Blackwell, vol. 9(2), pages 197-231, June.
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  17. Devereux, Michael B. & Yetman, James, 2010. "Price adjustment and exchange rate pass-through," Journal of International Money and Finance, Elsevier, vol. 29(1), pages 181-200, February.
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