Exchange Rate Elasticities of International Tourism and the Role of Dominant Currency Pricing
CESifo, Munich, 2022
CESifo Working Paper No. 9743
![](https://cesifo.org/DocImg/cesifo1_wp9743.jpg?c=1689236985)
We estimate exchange rate elasticities of international tourism. We show that, in addition to the bilateral exchange rate, the exchange rate between the tourism origin country vis-à-vis the U.S. dollar is an important driver of tourism flows, indicating a strong role of U.S. dollar pricing. The U.S. dollar exchange rate is more important for tourism destination countries with higher U.S. dollar borrowing, pointing toward a complementarity between U.S. dollar pricing and financing. Country-specific dominant currencies (CSDCs) play only a minor role for the average country but are important for tourism-dependent countries and those with a high concentration of tourists. The importance of the U.S. dollar exchange rate represents a strong piece of evidence of dominant currency pricing (DCP) in the international trade of services and suggests that the benefits of exchange rate flexibility for tourism-dependent countries may be weaker than previously thought.
Monetary Policy and International Finance
Trade Policy