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Price dynamics, foreign exchange and anticipated shocks in a tourism economy

Chao, Chi-Chur, Hu, Shih-Wen and Lu, Lee-Jung 2012, Price dynamics, foreign exchange and anticipated shocks in a tourism economy, Pacific economic review, vol. 17, no. 3, pp. 355-365.

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Title Price dynamics, foreign exchange and anticipated shocks in a tourism economy
Author(s) Chao, Chi-Chur
Hu, Shih-Wen
Lu, Lee-Jung
Journal name Pacific economic review
Volume number 17
Issue number 3
Start page 355
End page 365
Total pages 11
Publisher Wiley-Blackwell Publishing Asia
Place of publication Richmond, Vic.
Publication date 2012-08
ISSN 1468-0106
1361-374X
Keyword(s) price dynamics
tourism
exports
Summary Using a dynamic model of an open monetary economy, this paper examines the effects of tourism-related anticipated shocks on goods prices and foreign exchange reserves. Foreign tourists consume mainly non-traded goods in holiday destinations, converting them into exportable goods. This gives rise to a tourism terms-of-trade effect that affects the accumulation of foreign exchange. Announcements of anticipated events bring tourist visits forward, resulting in an initial under-adjustment or an over-adjustment in the prices of the non-traded goods when the tourism terms-of-trade effect is positive or negative. This leads to an increase or a decrease in foreign reserves in the long run.
Language eng
Field of Research 140207 Financial Economics
Socio Economic Objective 900301 Economic Issues in Tourism
HERDC Research category C1 Refereed article in a scholarly journal
Persistent URL http://hdl.handle.net/10536/DRO/DU:30049334

Document type: Journal Article
Collections: Faculty of Business and Law
Deakin Graduate School of Business
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