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Tourism as a Stabilizer of Foreign Currency Receipts: An Application to the Mediterranean Countries

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Abstract

This paper aims at examining merchandise exports and tourism receipts growths for twelve Mediterranean countries during the 1982-1994 period and seeing if the interaction of both can contribute to the stabilization of foreign currency receipts. The Markowitz portfolio investment model has been used to measure the instability or fluctuations of both export and tourism earnings taken together by combining the weighted variances of exports receipts as well as the covariance between the two. The results of the test show that, for the majority of the Mediterranean countries, tourism did indeed play a stabilizing role in the flow of foreign currency receipts. The stabilizing effect was most pronounced in countries where the correlation coefficient between export and tourism growth rates was negative. With the optimal theoretical weights for exports and tourism, which were calculated for each country, it was shown that fluctuations in foreign currency income could be reduced even.

Suggested Citation

  • Geyikdagi, Yasar Geyikdagi & Geyikdagi, Necla V., 1997. "Tourism as a Stabilizer of Foreign Currency Receipts: An Application to the Mediterranean Countries," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 50(4), pages 511-517.
    • Handle: RePEc:ris:ecoint:0320
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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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