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The Effect of Exchange Rate on the Iran’s Tourism Balance

Author

Listed:
  • Panahi, Hossein

    () (Associate Professor of Economics, University of Tabriz)

  • Masoomzadeh, Sara

    () (M.A. in Economics, University of Tabriz)

  • Razzaghi, Somayeh

    () (Ph.D. Candidate in Economics, University of Tabriz)

Abstract

In economic literature, the effect of exchange rate fluctuations on the balance of payments is highly important. Tourism is one of the main sub-sections of the balance of payments. Using vector error correction model, this paper identifies the effect of exchange rate changes on the balance of payments by assessment the existence of J-Curve in tourism industry over the period of 1995 to 2013.The results confirm the existence of J curve in Iran's tourism balance of payments. It means that exchange rate appreciation has reduced tourism revenues in the first period but after six periods it has increased tourism revenues and improved its balance of payments. Also revenue of this industry is over than it`s expenditures. In other word, the shock on the exchange rate, has improved tourism balance of payments after a period of deterioration. Also, the results of the data analysis of export-import and balance of payments functions confirms that export function has highly been effected by changes in exchange rate. In other word 0.89 of export function change`s is explained by exchange rate`s changes. Import function has also highly been effected by changes in exchange rate. It means 0.249 of import function change`s is explained by exchange rate`s changes. Furthermore, tourism balance of payments is more sensitive to changes in Iran’s revenues. On the other hand 0.395 changes in balance of payment has explained by domestic revenue`s changes.

Suggested Citation

  • Panahi, Hossein & Masoomzadeh, Sara & Razzaghi, Somayeh, 2017. "The Effect of Exchange Rate on the Iran’s Tourism Balance," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 4(2), pages 127-142, September.
  • Handle: RePEc:ris:qjatoe:0077
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    More about this item

    Keywords

    Exchange Rate; Tourism Balance of Payments; J- Curve; Vector Error Correction;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General

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