IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

European Monetary Union and International Tourism

  • Egon Smeral


Registered author(s):

    The single European currency has direct (elimination of currency-exchange costs, low interest on borrowed capital, stable nominal exchange rates between EMU participants) and indirect effects (on real income and growth) on European tourism: • Following the introduction of the single currency, tourists will no longer be burdened with the costs of currency exchange and therefore feel a positive income effect. Hence, they will have a larger disposable budget, which may result in higher demand for other goods and services. However, besides these positive effects on income, there will also be a shift in demand, with destinations within EMU becoming cheaper relative to those outside EMU. Demand for destinations within the euro zone from outside EMU may tend to increase, although the effects are expected to be fairly insignificant on account of the relative price decline. • The creation of EMU results in a one-time drop of long-term interest rates. In the field of tourism, a lowering of interest rates would grant the small and medium-sized businesses of the hotel and catering sector, many of them highly in debt, some financial breathing space. This might result in more capital spending and an increased competitiveness. • In the field of tourism, the exchange-rate turbulence of the 1990s have had a noticeable influence on the development of market shares. Owing to the introduction of the single European currency, shifts of international travel flows under the impact of exchange rate fluctuations will no longer occur in the euro zone. Hence, price-related influences of travel flows within the euro zone will only be due to regional price differences, which are, however, limited to a relatively narrow margin on account of the stability pact. Austrian tourism, in particular, will benefit from the single currency, since soft-currency countries are expected to experience comparatively stronger price increases. Stable exchange rates also eliminate the need for rate hedging, which in turn may induce travel operators to offer their products at lower prices. • The establishment of the European Monetary Union with a single currency and a central monetary policy results in a higher level of efficiency and capital accumulation than can ever be achieved in a situation with different currencies, which in turn generates higher economic growth and stimulates activities in tourism. To assess the effects of the establishment of EMU, a forecasting model designed for international tourism was used; the baseline version of the forecast was compared with the hypothetical case of non-establishment of EMU (simulation version). An attempt was made to identify the effects of EMU by looking at the development of the balance of tourism for the period from 1999 to 2003 relative to GDP. Under the impact of EMU, Austria will achieve an increase of its cumulative balance of tourist travel by 1.5 percent of GDP and, hence, be among the clear winners of EMU in this respect, besides Germany and France. The biggest hypothetical losses due to the introduction of the single currency will be suffered by Finland and Italy (–1.3 percent and –1.2 percent of GDP, respectively). In general, an analysis of cumulative balances shows that the hard-currency countries will benefit from EMU, while the soft-currency countries have to expect some losses.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    File Function: Abstract
    Download Restriction: Payment required

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by WIFO in its journal WIFO-Monatsberichte.

    Volume (Year): 72 (1999)
    Issue (Month): 3 (March)
    Pages: 187-195

    in new window

    Handle: RePEc:wfo:monber:y:1999:i:3:p:187-195
    Contact details of provider: Postal: Arsenal Object 20, A-1030 Wien
    Phone: (+43 1) 798 26 01-0
    Fax: (+43 1) 798 93 86
    Web page:

    More information through EDIRC

    Order Information: Postal: Austrian Institute of Economic Research Publikationsverkauf und Abonnentenbetreuung Arsenal, Objekt 20 A-1030 Vienna/Austria

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Baker, Terence J. & FitzGerald, John & Honohan, Patrick, 1996. "Economic Implications for Ireland of EMU," Research Series, Economic and Social Research Institute (ESRI), number PRS28.
    2. Breuss, Fritz, 1997. "The Economic Consequences of a Large EMU � Results of Macroeconomic Model Simulations," European Integration online Papers (EIoP), European Community Studies Association Austria (ECSA-A), vol. 1, 05.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wfo:monber:y:1999:i:3:p:187-195. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilse Schulz)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.