The Exchange Rate and US Tourism Balance of Trade

Cheng, Ka Ming and Kim, Hyeongwoo and Thompson, Henry (2009): The Exchange Rate and US Tourism Balance of Trade.

Abstract

This paper investigates evidence on the effect of dollar depreciation on the US tourism balance of trade. Export revenue and import spending functions are estimated separately with structural vector autoregressive methods to better capture the dynamic adjustment to exchange rate shocks. Quarterly data cover the period of floating exchange rates from 1973 through 2007. Depreciation raises long term US export revenue but there is no effect on import spending.

• Item Type: MPRA Paper
• Language: English
• Keywords: balance of trade; exchange rate; tourism; structural vector autoregressive model; J-curve
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; F - International Economics > F1 - Trade > F10 - General

References

Ardalani, Z. and M. Bahmani-Oskoosee (2007) Is there a J-Curve at the Industry Level? Economics Letters, 6, 1-12.

Bahmani-Oskooee, M. and T. J. Brooks (1999) Bilateral J-curve between US and Her Trading Partners, Weltwirtschaftliches Archiv, 135, 156-65.

Bahmani-Oskooee, M. and M. Malixi (1992) More evidence on the J-curve from LDCs, Journal of Policy Modeling, 14, 641-53.

Bahmani-Oskooee, M. and A. Ratha (2004) The J-Curve: A Literature Review, Applied Economics, 36, 1377-98.

Boyd, D., G. M. Caporale, and R. Smith (2001) Real Exchange Rate Effects on the Balance of Trade: Cointegration and the Marshall-Lerner Condition, International Journal of Finance and Economics, 6, 187-200.

Crouch G. L. (1994) The Study of International Tourism Demand: A Review of Findings, Journal of Travel Research, 33, 12-23.

Demirden, T. and I. Pastine (1995) Flexible exchange rates and the J-curve: An alternative approach, Economics Letters, 48, 373-77.

Doroodian, K., C. Jung, and R. Boyd (1999) The J-curve effect and US agricultural and industrial trade, Applied Economics, 31, 687-95.

Dupont, B., A. Gandhi, and T. Weiss (2008) The American Invasion of Europe: The Long Term Rise in Overseas Travel, 1820-2000, NBER Working Paper, 13977.

Goldstein, M. and M. S. Khan (1978) The Supply and Demand for Exports: a Simultaneous Approach, The Review of Economics and Statistics, 60, 275-86.

Goldstein, M. and M. S. Khan (1985) Income and Price Effects in Foreign Trade, in Handbook of International Economics, Vol. 2 (Ed.) R. Jones and P. Kenen, Amsterdam: Elsevier.

Harris, R. I. D. (1992) Testing for Unit Roots using the Augmented Dickey-Fuller Test: Some Issues Relating to the Size, Power and the Lag Structure of the Test, Economics letters, 38, 381-86.

Harrop, J. (1973) On the Economics of Tourist Boom, Bulletin of Economic Research, May, 55-72.

Haynes, S. and J. Stone (1982) Impact of the Terms of Trade on the U.S. Trade Balance: A Reexamination, The Review of Economics and Statistics, 64, 702-06.

Hazari, B. R. (1995) Tourism and Growth in a Dynamic Model of Trade, The Journal of International Trade & Economic Development, 4, 243-52.

Hazari, B. R. and A-Ng (1993) An Analysis of Tourists' Consumption of Non-traded Goods and Services on the Welfare of the Domestic Consumers, International Review of Economics & Finance, 2, 43-58.

Hazari B. R. and J. J. Nowak (2003) Tourism, Taxes and Immiserization: A Trade Theoretic Analysis, Pacific Economic Review, 8, 279-87.

Hazari, B. R. and P. M. Sgro (2004) Tourism, Trade and National Welfare, Elsevier.

Houthakker, H. S. and S. P. Magee (1969) Income and Price Elasticities in World Trade, The Review of Economics and Statistics, 51, 111-25.

Junz, H. B. and R. R. Rhomberg (1973) Price-competitiveness in Export Trade among Industrial Countries, The American Economic Review, 63, 412-18.

Magee, S. P. (1973) Currency Contracts, Pass Through and Depreciation, Brooking Papers on Economic Activity, 1, 303-25.

Magee, S. P. (1975) Prices, Income and Foreign Trade: A Survey of Recent Economic Studies, in International trade and finance: Frontiers for research (Ed.) P. B. Kenen, Cambridge: Cambridge University Press.

Meade, E. E. (1988) Exchange Rates, Adjustment, and the J-curve, Federal Reserve Bulletin, October, 633-44.

Onafowora, O. (2003) Exchange Rate and Trade Balance in East Asia: Is there a J-curve? Economics Bulletin, 5, 1-13.

Rhomberg, R. R. (1973) Towards a General Trade Model, in The International Linkage of National Economic Models (Ed.) R. J. Ball, Amsterdam: North-Holland.

Rose, A. K. (1991) The role of Exchange Rates in a Popular Model of International Trade: Does the ‘Marshall-Lerner’ Condition Hold? Journal of International Economics, 30, 301-16.

Rose, A. K. and J. L. Yellen (1989) Is there a J-curve? Journal of Monetary Economics, 24, 53-68.

Rosensweig, J. A. (1988) Elasticities of Substitution in Caribbean Tourism Demand, Journal of Development Economics, 29, 89-100.

Rosensweig, J. A. and P. D. Koch (1988) The US Dollar and the ‘Delayed J-curve’, Economic Review, July/August, Federal Reserve of Atlanta.

Senhadji, A. S. (1998a) Dynamics of the Trade Balance and the Terms of Trade in LDCs: the S-curve, Journal of International Economics, 46, 105-31.

Senhadji, A. S. (1998b) Time Series Estimation of Structural Import Demand Equations: A Cross-Country Analysis, International Monetary Fund Staff Papers, 45, 236-68.

Senhadji, A. and C. E. Montenegro (1999) Time Series Analysis of Export Demand Equations: A Cross-Country Analysis, International Monetary Fund Staff Papers, 46, 259-73.

Sims, C. (1980) Macroeconomics and Reality, Econometrica, 48, 1-48.

Socher, K. (1986) Tourism in the Theory of International Trade and Payments, Tourism Review, 41, 24-26.

Song, H., S. F. Witt and G. Li (2009) The Advanced Econometrics of Tourism Demand, New York: Routledge.

Vogt, M. G. (2008) Determinants of the Demand for US Exports and Imports of Tourism, Applied Economics, 40, 667-72.

World Tourism Organization (2008) UNWTO World Tourism Barometer 6.

Yazici, M. (2006) Is the J-curve Effect Observable in Turkish Agricultural Sector? Journal of Central European Agriculture, 7, 319-22.