ABSTRACT
There has been an increasing wave of globalization since the turn of the millennium. This study focuses on two by-products of globalization: dollarization and tourism. Empirical studies have ignored the possible relationship between dollarization and tourism. However, we hypothesize that a booming tourism industry will fuel increase in the usage and circulation of foreign currencies, thus increasing the level of dollarization. The objective of this study is to examine the extent to which the tourism industry exacerbates the dollarization process of selected Sub-sahara African (SSA) countries. Using Tobit regression, we found that tourism positively affects dollarization. Our results are robust to: (i) alternative measures of tourism; (ii) accounting for endogeneity and outlier effects.
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Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 This explains why much of the studies on dollarization have mainly focused on regions like Latin America, Sub-Sahara Africa, parts of Asia and Eastern Europe.
2 A country will adopt the currency of another country that: (i) is considered their ally; (ii) shares similar cultural heritage; (iii) former colonial master (Berg & Borensztein, Citation2000).
3 It is quite difficult to get data for the third channel.
4 The countries selected are Angola, Botswana, Burundi, Cape Verde, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ghana, Guinea, Kenya, Liberia, Malawi, Mauritius, Mozambique, Namibia, Nigeria, Rwanda, Sao Tome and Principle, Seychelles, Sierra Leone, South Africa, Tanzania, Uganda and Zambia.