Exchange Rate Elasticities of International Tourism and the Role of Dominant Currency Pricing

February 4, 2022

Preview Citation

Format: Chicago

Ding Ding, and Yannick Timmer. Exchange Rate Elasticities of International Tourism and the Role of Dominant Currency Pricing, (USA: International Monetary Fund, 2022) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We estimate a variety of exchange rate elasticities of international tourism. We show that, in addition to the bilateral exchange rate between the tourism origin and destination countries, the exchange rate vis-à-vis the US dollar is also an important driver of tourism flows and pricing. The effect of US dollar pricing is stronger for tourism destination countries with higher dollar borrowing, indicating a complementarity between dominant currency pricing and financing. Country-specific dominant currencies (CSDCs) play only a minor role for the average country, but are important for tourism-dependent countries and those with a high concentration of tourists. The importance of the dollar exchange rate represents a strong piece of evidence of dominant currency pricing (DCP) in the international trade of services and suggests that the benefits of exchange rate flexibility for tourism-dependent countries may be weaker than previously thought.

Subject: Currencies, Depreciation, Economic sectors, Exchange rate adjustments, Exchange rates, Foreign exchange, Money, National accounts, Tourism

Keywords: Caribbean, Country-specific dominant currencies, Currencies, Currency pricing, Depreciation, Ding ding, Dominant currency financing, Dominant currency pricing, Exchange rate adjustments, Exchange rate elasticity, Exchange rate vis-à-vis, Exchange rates, Global, International tourism, Tourism, Trade of services

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/024
Stock No:

WPIEA2022024
ISBN:

9781616358563
ISSN:

1018-5941

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