Effects of the tourism industry on the balance of payments deficit

Abstract

The balance of payments is an accounting record that indicates the economic and financial situations of a country as compared with other countries. International tourism directly affects the balance of payments as an invisible export entry. The significant contribution of international tourism appears on the balance of payments account under the entry of international services. In order to discuss the favourable effect of tourism on the balance of payments, the amount of foreign currency revenues for a country must exceed the amount of foreign currency expenditures. Most developing countries, including Turkey, are exposed to crucial balance of payments and foreign trade deficits. At this point, tourism has a favourable effect in closing the gap in foreign trade and the balance of payments. This paper examines the primary effect of numerical tourism revenues on the balance of payments between 1984 and 2012 in Turkey. The empirical findings suggest that the increase in tourism revenues over this period has resulted in a decrease in the balance of payments deficit of 14%.

Keywords:

• tourism
• tourism revenue
• balance of payments
• unit root test
• stationary test
• regression analysis

Notes

This paper is a revised and extended version of the conference paper accepted as an abstract at the Current Account Imbalances Center for Economics and Econometrics Annual Conference, on 17–18 December 2012, Boğaziçi University, İstanbul, Turkey.