Exchange Rate Volatility and Tourist Flows into Turkey

Exchange Rate Volatility and Tourist Flows into Turkey

This paper examines the effects of Exchange Rate Volatility on tourist flows into Turkey for the period of 1994~2012. Our results show that (i) there is a negative relationship between exchange rate volatility and tourist inflows into Turkey; (ii) there is a negative impact of the relative price ratio on the tourist flows indicating that relatively expensive places deter tourist arrivals, given the keen international competition among alternative destinations; (iii) GDP per capita at tourist origin, measured in Purchasing Power Parities, exerts positive influence on tourist flows. Our findings thus, suggest some direct policy implications: first, policy makers of a tourist destination country aiming to target potential markets for their tourist products, should, in principle, avoid markets prone to exchange rate volatility due to political and social upheavals or financial instability. Moreover, countries relying heavily on their tourism industry, should avoid using exchange rate policies for other policy objectives like international price competiveness, as these policies may end up to an exchange rate volatility that could reduce its tourism inflows substantially in the longer run.