An Investigation of the Factors Affecting Iran's Tourism Demand with Emphasis on Exchange Rate Gap (The application of the Markov Switching-Vector Error Correction)

Articles in Press

Document Type : Research Paper

Authors

1 Assistant Professor of Natural Resources and Environment Economics, Department of Tourism and Hotel Management, Faculty of Tourism, Bam Higher Education Complex, Bam, Iran.

2 Professor of Economics, Shahid Bahonar University

3 Assistant Professor, Department of Tourism, Faculty of Tourism and Hospitality, Bam Higher Education Complex, Bam, Iran.

Abstract

Given the importance of the tourism industry in all countries, especially developing countries including Iran, and the impact of this industry on the exchange rate, this study aimed to investigate the impact of the factors affecting Iran's tourism demand with emphasis on the exchange rate gap for 1990-2019. The official and real exchange rate gap in the studied years was first calculated. The nonlinear Markov switching-vector error correction method was then used to explore the impact of the effective factors on Iran's international tourism demand. The results indicated that the exchange rate gap in both Markov regimes had a positive and significant effect on the tourism demand in Iran. Also, the variables of global per capita income, GDP, and tourist behaviors in previous periods had a positive impact on the tourism demand. The indicator of trade freedom also affected tourism demand positively and significantly. It is, therefore, suggested to pay more attention to the tourism industry in the growth and development plans to get out of the petroleum-based single-product economy and deal with the economic sanctions. Furthermore, to develop the tourism industry, in addition to appropriate foreign exchange policies, it is necessary to adopt policies to increase GDP, which would increase the potential for attracting tourists.

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Majlis and Rahbord

Articles in Press, Accepted Manuscript
Available Online from 14 August 2023

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