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On the impact of exchange rate regimes on tourism

Author

Listed:
  • María Santana-Gallego

    (Universidad de La Laguna)

  • Francisco J. Ledesma-Rodríguez

    (Universidad de La Laguna)

  • Jorge V. Pérez-Rodríguez

    (Universidad de Las Palmas de Gran Canaria)

Abstract

The main objective of this paper is to analyze the effect of the exchange rate arrangements on international tourism. The ambiguity of literature about the effect of exchange rate volatility contrasts with the magnitude of the impact of a common currency on trade. On the basis of a gravity equation we estimate a moderate effect of a currency union on tourism of almost 12%. Furthermore, we estimate a gravity equation for international trade, obtaining that the common currency effect on trade is reduced when tourism is introduced as a regressor. This suggests that tourism flows may contribute to explain the excessive magnitude of the estimated effect of a common currency on trade in this literature. Finally, we analyze the impact of several de facto exchange rate arrangements on tourism, finding that less flexible exchange rates promotes tourism flows.

Suggested Citation

  • María Santana-Gallego & Francisco J. Ledesma-Rodríguez & Jorge V. Pérez-Rodríguez, 2007. "On the impact of exchange rate regimes on tourism," Working Papers 07-07, Asociación Española de Economía y Finanzas Internacionales.
    • Handle: RePEc:aee:wpaper:0707
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    References listed on IDEAS

    as
    1. Christopher M. Meissner, 2003. "Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era," American Economic Review, American Economic Association, vol. 93(1), pages 344-353, March.
    2. Andrew K. Rose & T. D. Stanley, 2005. "A Meta-Analysis of the Effect of Common Currencies on International Trade ," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 347-365, July.
    3. Alejandro Micco & Ernesto Stein & Guillermo Ordoñez, 2003. "The currency union effect on trade: early evidence from EMU," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 315-356, October.
    4. Rose, Andrew K, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," CEPR Discussion Papers 2329, C.E.P.R. Discussion Papers.
    5. Rose, Andrew K & Engel, Charles, 2002. "Currency Unions and International Integration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 1067-1089, November.
    6. Salvador Gil-Pareja & Rafael Llorca-Vivero & José Antonio Martínez-Serrano, 2007. "The Effect of EMU on Tourism," Review of International Economics, Wiley Blackwell, vol. 15(2), pages 302-312, May.
    7. Andrew K. Rose, 2001. "Currency unions and trade: the effect is large," Economic Policy, CEPR;CES;MSH, vol. 16(33), pages 449-461, October.
    8. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 437-466.
    9. Klein, Michael W., 2005. "Dollarization and trade," Journal of International Money and Finance, Elsevier, vol. 24(6), pages 935-943, October.
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    11. Yair Eilat & Liran Einav, 2004. "Determinants of international tourism: a three-dimensional panel data analysis," Applied Economics, Taylor & Francis Journals, vol. 36(12), pages 1315-1327.
    12. T. Easton, Stephen, 1998. "Is Tourism Just Another Commodity? Links between Commodity Trade and Tourism," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 522-543.
    13. Rodney Thom & Brendan M. Walsh, 2001. "The effect of a common currency on trade : Ireland before and after the Sterling link," Working Papers 200110, School of Economics, University College Dublin.
    14. Peter B. Clark & Shang-Jin Wei & Natalia T. Tamirisa & Azim M Sadikov & Li Zeng, 2004. "A New Look at Exchange Rate Volatility and Trade Flows," IMF Occasional Papers 235, International Monetary Fund.
    15. Gil-Pareja, Salvador & Llorca-Vivero, Rafael & Martinez-Serrano, Jose Antonio, 2007. "Did the European exchange-rate mechanism contribute to the integration of peripheral countries?," Economics Letters, Elsevier, vol. 95(2), pages 303-308, May.
    16. Paul De Grauwe, 1988. "Exchange Rate Variability and the Slowdown in Growth of International Trade," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 63-84, March.
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    More about this item

    Keywords

    Tourism; Exchange Rate Regime; Common Currency;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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