Financial and Banking Strategic Studies

Investigating the effects of exchange rate volatility on tourist flows

Document Type : Original Article

Authors

Mostafa Heidari Haratemeh 1
Behnam Ebrahimi 2

1 Department of Economics, Naragh Branch, Islamic Azad University, Naragh, Iran.

2 Department of Business Management, Naraq Branch, Islamic Azad University, Naraq, Iran.

https://doi.org/10.22105/fbs.2024.193850
Abstract
Purpose: Today, some scholars believe that exchange rate volatility may reduce the arrival of tourists. Therefore, the purpose of this study was to investigate the effect of exchange rate volatility on the tourism flow in the Iranian economy during the period from the first quarter of 2000 to the fourth quarter of 2020.
Methodology: In most past surveys, the standard deviation of the moving average of the exchange rate logarithm has been used as a criterion for calculating exchange rate volatility; in this research, a new criterion was used to assess exchange rate volatility. The research method is based on cointegration theory, including correcting the error in the exchange rate volatility criteria using the ARDL econometric model for cointegration.
Findings: The results showed: 1) in addition to the attractions of visiting countries as expected, the ratio of GDP per capita to relative proportions has a positive and significant impact on the flow of tourism, 2) relative prices in most cases are negative and meaningful, meaning that the relative price level between the country of origin and destination has a significant and negative effect, and 3) the exchange rate volatility affect the flow of tourism and the arrival of tourists.
Originality/Value: Exchange rate fluctuations have a negative and significant effect on the arrival of foreign tourists to Iran. Therefore, it is necessary for policymakers to consider this category when designing their policy measures. Although, in recent years, with the rise in the exchange rate, the arrival of a significant number of foreign tourists to Iran is expected to increase, the rise in inflation has eroded the advantage of cheap travel to Iran.

Keywords

Exchange rate volatility
Tourism
Iran economy
ARDL
Error correction

Subjects

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Financial and Banking Strategic Studies
Volume 2, Issue 1
Spring 2024
Pages 36-44

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