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

Listed author(s):
  • 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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  17. 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.
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