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31/07/2024
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Le, N. M. P., & Tran, D. T. T. (2024). Analyzing the causal relationship between exchange rate and international tourism in Vietnam. Journal of International Economics and Management, 24(2), 24-40. https://doi.org/10.38203/jiem.024.2.0084
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Analyzing the causal relationship between exchange rate and international tourism in Vietnam
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Abstract
The impact of tourism on exchange rates, and vice versa, varies from country to country. This study empirically explores the causal relationship between exchange rates and international tourism in Vietnam. To examine this relationship, data on real exchange rates, foreign tourist arrivals, and real tourism revenue were extracted from the general statistical yearbook from 2000 to 2019. This paper explicitly highlights how exchange rates impact tourism under a government-controlled exchange rate regime. The results indicate a weak unidirectional causal relationship between foreign tourist arrival and real exchange rates. An increase in the real exchange rate increases short-term income but has a negative impact on long-term tourism revenue, while an increase in real tourism revenue reduces the real exchange rate in the short run but is stable in the long run. The research supports the perspective that maintaining a stable exchange rate attracts international tourists in the long term. Based on these findings, the Vietnamese government should adopt a cautious approach to price stabilization policies and encourage export-oriented industries to attract international tourists and promote tourism.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Keywords
Tourism, Exchange rate, Vector autoregression, Granger causality, Impulse response function
References
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Thanh, N.N. and Kalirajan, K. (2005), “The importance of exchange rate policy in promoting Vietnam’s exports”, Oxford Development Studies, Vol. 33 No. 3-4, pp. 511-529.
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Zardad, A., Mohsin, A. and Zaman, K. (2013), “Estimating long-run equilibrium real exchange rates: short-lived shocks with long-lived impacts on Pakistan”, SpringerPlus, Vol. 2 No. 1, pp. 1-11.
Borrego-Domínguez, S., Isla-Castillo, F. and Rodríguez-Fernández, M. (2022), “Determinants of tourism demand in Spain: a European perspective from 2000-2020”, Economies, Vol. 10 No. 276, pp. 1-21.
Choi, K.H. and Kim, I. (2021), “Co-movement between tourist arrivals of inbound tourism markets in South Korea: applying the dynamic copula method using secondary time series data”, Sustainability, Vol. 13 No. 3, pp. 1-13.
CIEM (2010), Comprehensive Evaluations of Vietnam’s Socio-Economic Performance 3 Years after Accession to the WTO, Finance Publishing House, Hanoi.
CIEM (2013), Comprehensive Evaluations of Vietnam’s Socio-Economic Performance 5 Years after Accession to the WTO, Finance Publishing House, Hanoi.
CIEM (2018), Macroeconomic Report for Q4-2017, Finance Publishing House, Hanoi.
CIEM (2019), Macroeconomic Report for Q1-2018, Finance Publishing House, Hanoi.
De Vita, G. (2014), “The long-run impact of exchange rate regimes on international tourism flows”, Tourism Management, Vol. 45, pp. 226-233.
Dickey, D.A. and Fuller, W.A. (1979), “Distribution of the estimators for autoregressive time series with a unit root”, Journal of the American Statistical Association, Vol. 74 No. 366a, pp. 427-431.
Ding, D. and Timmer, Y. (2022), “Exchange rate elasticities of international tourism and the role of dominant currency pricing”, IMF Working Papers No 2022/024, Available at https://www.imf.org/en/Publications/WP/Issues/2022/02/04/Exchange-Rate-Elasticities-of-International-Tourism-and-the-Role-of-Dominant-Currency-511835 (Accessed 07 February, 2023).
Dinh, V.T., De Kleine Feige, A.I., Pham, D.M., Eckardt, S., Vashakmadze, E.T., Kojucharov, N.D. and Mtonya, B.G. (2019), “Taking stock: recent economic developments of Vietnam–special focus: Vietnam's tourism developments-stepping back from the tipping point-Vietnam's tourism trends, challenges and policy priorities”, World Bank No. 138475, World Bank Group, Washington D.C.
Gao, X., Chang, H.L. and Su, C.W. (2018), “Does exchange rate always affect the number of inbound tourists significantly in China?”, Theoretical and Applied Economics, Vol. 25 No. 1, pp. 55-72.
Granger, C.W. (1969), “Investigating causal relations by econometric models and cross-spectral methods”, Econometrica: Journal of the Econometric Society, Vol. 37 No. 3, pp. 424-438.
Harrison, D. (2007), “Towards developing a framework for analysing tourism phenomena: a discussion”, Current Issues in Tourism, Vol. 10 No. 1, pp. 61-86.
He, Z. (2023), “The impact of falling tourism industry caused by Covid-19 on Thai currency and the Thai Baht’s prospects”, Highlights in Business, Economics and Management, Vol. 3, pp. 36-42.
Hung, N.T. and Hieu, H.M. (2022), “Tourism demand and economic growth in Vietnam: fresh insights based on the partial and multivariate wavelet approaches”, Singapore Economic Review, Online Ready.
Huzeima, M. and Salia, A.M. (2020), “Influence of tourism supply and demand elements in destination attractiveness: the case of the West Gonja district”, Journal of Tourism & Hospitality, Vol. 9 No. 4, 435.
Jena, S.K. and Dash, A.K. (2020), “Does exchange rate volatility affect tourist arrival in India: a quantile regression approach”, Regional and Sectoral Economic Studies, Vol. 20 No. 2, pp. 65-78.
Kayar, Ç.H. and Kozak, N. (2010), “Measuring destination competitiveness: an application of the travel and tourism competitiveness index (2007)”, Journal of Hospitality Marketing & Management, Vol. 19 No. 3, pp. 203-216.
Kuncoro, H. (2016), “Do tourist arrivals contribute to the stable exchange rate? Evidence from Indonesia”, Journal of Environmental Management and Tourism, Vol. 7 No. 1. pp. 63-78.
Lee, J.W. (2012), “The impact of foreign exchange rates on international travel: the case of South Korea”, Journal of Distribution Science, Vol. 10 No. 9, pp. 5-11.
Morley, C., Rosselló, J. and Santana-Gallego, M. (2014), “Gravity models for tourism demand: theory and use”, Annals of Tourism Research, Vol. 48, pp. 1-10.
Munar, A.M. and Jacobsen, J.K.S. (2014), “Motivations for sharing tourism experiences through social media”, Tourism Management, Vol. 43, pp. 46-54.
Nguyen, C.N., Bui, T.A., Le, T.H. and Nguyen, T.C.H. (2018), “The impact of exchange rate movements on trade balance between Vietnam and Japan: J curve effect test”, VNU Journal of Economics and Business, Vol. 34 No. 2, pp. 17-27.
Nguyen, V.B. (2009), “Managing exchange rate policy in 2008 and directions for 2009”, Available at https://tinyurl.com/s9p5jfce (Accessed 05 March, 2023).
Nunkoo, R. and Ramkissoon, H. (2011), “Developing a community support model for tourism”, Annals of Tourism Research, Vol. 38 No. 3, pp. 964-988.
Peng, B., Song, H., Crouch, G.I. and Witt, S.F. (2015), “A meta-analysis of international tourism demand elasticities”, Journal of Travel Research, Vol. 54 No. 5, pp. 611-633.
Phan, N.B.H and Le, D.T. (2021), “Testing the Tourism-led growth hypothesis for Vietnam”, DTU Journal of Science and Technology, Vol. 45 No. 2, pp. 141-151.
Puah, C.H., Thien, F.T., Arip, M.H. and Chin, M.Y. (2019), “Modelling a tourism demand in Vietnam”, International Journal of Economics and Management, Vol. 13 No. 2, pp. 319-329.
Rosselló Nadal, J. and Santana Gallego, M. (2022), “Gravity models for tourism demand modeling: empirical review and outlook”, Journal of Economic Surveys, No. 36 Vol. 5, pp. 1358-1409.
Sheldon, P.J. (1993), “Forecasting tourism: expenditures versus arrivals”, Journal of Travel Research, Vol. 32 No. 1, pp. 13-20.
Song, H., Qiu, R.T.R. and Park, J. (2019), “A review of research on tourism demand forecasting: launching the annals of tourism research curated collection on tourism demand forecasting”, Annals of Tourism Research, Vol. 75, 338-362.
Thanh, N.N. and Kalirajan, K. (2005), “The importance of exchange rate policy in promoting Vietnam’s exports”, Oxford Development Studies, Vol. 33 No. 3-4, pp. 511-529.
Tung, L.T. and Thang, P.N. (2022), “Impact of exchange rate on foreign tourist demand: evidence from developing countries”, Geojournal of Tourism and Geosites, Vol. 45 No. 4, pp. 1579-1585.
Vu, H.D., Nguyen, A.T.N., Nguyen, N.T.P. and Tran, D.B. (2022), “Impacts and restoration strategy of the tourism industry post-COVID-19 pandemic: evidence from Vietnam”, Journal of Tourism Futures, Vol. ahead-of-print No. ahead-of-print.
UNWTO (2019), “Exports from international tourism hit USD 1.7 trillion”, Available at https://www.unwto.org/global/press-release/2019-06-06/exports-international-tourism-hit-usd-17-trillion (Accessed 07 March, 2022).
UNWTO (2020), “International tourism growth continues to outpace the global economy”, Available at https://www.unwto.org/international-tourism-growth-continues-to-outpace-the-economy (Accessed 15 February, 2022).
Zardad, A., Mohsin, A. and Zaman, K. (2013), “Estimating long-run equilibrium real exchange rates: short-lived shocks with long-lived impacts on Pakistan”, SpringerPlus, Vol. 2 No. 1, pp. 1-11.