Impact of Exchange Rate Changes on Asian Tourism Consumption: New Evidence from a Panel Smooth Transition Model

Abstract

Growing Asian international tourism has been significant and helpful for economic improvement in the 21st century. It is argued that the decision regarding destination choice for international tourists would be influenced by the exchange rates among origin and destination countries over time. This paper applies the panel smooth transition regression (PSTR) model to examine the asymmetric effects of exchange rate on international tourism consumption in eight Asian countries by using monthly data over the period of January 2001-July 2007. Empirical results have shown dynamic nature of log-difference exchange rate on log-difference of international tourism. There are growth rate adjustments of international tourist arrivals to exchange rate growth within 0.35%~0.64%. Currency of destination country appreciated relatively to currency of origin country is harmful to the international tourism business in destination country and vice versa.