The Effect of Real Effective Exchange Rate on Average Expenditure Per Tourist in Türkiye

Abstract

Purpose – Exchange rates have a significant impact on the amount of expenditure made by tourists in Türkiye. In this context, the aim of this study is to explain the relationship between the real effective exchange rate and the average expenditure per tourist in Türkiye between 2002 and 2022 using econometric methods. Design/methodology/approach – In the model, average expenditure per tourist is taken as the dependent variable and the real effective exchange rate is taken as the independent variable. The long-run relationship between the variables is estimated by the Johansen cointegration model and the short-run relationship is estimated by the vectör error correction model. The direction of causality between the variables is analyzed with the VECM-based Granger causality test. Findings – There is a relationship between real effective exchange rate and average expenditure per tourist in both short and long run. In the long run, a 1% increase in the real exchange rate increases the average expenditure per tourist by 0.18%. In addition, a unidirectional causality relationship was found from the real exchange rate to the average expenditure per tourist in the long run and a bidirectional causality relationship in the short run. Discussion – In the study, based on econometric methods, the effect of real effective exchange rate on average expenditure per tourist in Türkiye is positive and significant. Therefore, in order for the average expenditure per tourist in Türkiye to increase and for tourism revenues to increase accordingly, the real exchange rate must increase, that is, the Turkish Lira must appreciate.