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The Impact of Exchange Rate on Tourism Industry: The Case of Turkey

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Handbook of Research
on Global Hospitality and
Tourism Management

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 107

Chapter 7
The Impact of Exchange
Rate on Tourism Industry:
The Case of Turkey

Meryem Samirkaş
Yuzuncuyil University, Turkey

Mustafa Can Samirkaş

Mersin University, Turkey

ABSTRACT
Tourism sector that is increasingly important in the world economy, developing rapidly in Turkey and
provides a serious contributions to country’s economy because Turkey consistently has a current ac-
count deficit, tourism is an important source of income. There are many factors affecting tourism; it
is clear that the industry can be affected by changes in macroeconomic variables, just like any other
economic focus. In this context, it is possible that the foreign exchange rate and changes in the value of
various currencies can affect tourism, especially with regards to the demands of the tourists themselves.
By using the Johansen cointegration and Granger causality tests, this chapter focused on identifying the
relationship between currency exchange rates and the demand for tourism in Turkey.

INTRODUCTION of the exchange income in many countries, has

become one of the primary points. From the 20th
Tourism, with the generating of commercial century, tourism sector with telecomunication and
airline industry after the World War II and with information technologies has become one of the
the using of the technologies of jet aircraft which most expanding sectors in the world economy.
highly accelerates transportation in 1950s, has Moreover, it is, after the petrochemistry, the second
gained speed and grown up significantly. As of largest sectors in the west and it is also among the
1990s, it has become a vast sector that provides first large three sectors in the world (Pınar, 2005).
employment at most in the world. At present time, According to the World Travel and Tourism
international tourism, both in terms of providing Council (WTTC), tourism is one of the largest
new occupation opportunities and being basis sectors in the world not only in the sense of gross
DOI: 10.4018/978-1-4666-8606-9.ch007

Copyright © 2015, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited.
 
The Impact of Exchange Rate on Tourism Industry

production scope, employment, tax contribution and was an important step for the development of
but also capital investment and value-added the industry in Turkey.
(Aslan, 2008). While the world tourism revenue In 1980 a total of 778 facilities were registered
was $2.1 billion in 1950, it increased to $1.075 as certified tourism businesses, with 42,011 rooms
billion in 2012. It was also same for the number of and 82,332 beds available to guests. By the year
tourists. Whereas 25.3 million people participated 2012, investment had raised those numbers 3,830
in tourism circulation in 1950, this number reached facilities, 463,039 rooms, and 979,896 beds. As a
to 1.035 million people in 2012 (UNWTO, 2013). direct result of these developments, the country
Although the tourism industry has several has seen a dramatic rise in the number of visitors
important dimensions—historical, social and and associated tourist revenue. In 1970, only 754
cultural—it is foremost a social activity which is thousand tourists came to Turkey. In contrast, 1.2
most important when considered as an economic million visited in 1980 and 35 million visited in
variable. From the economic perspective, the 2013. Alongside these increased visitor numbers,
tourism industry’s foreign exchange earnings, tourist revenues of 1970 measuring US$51.6
encouragement of foreign capital investment, em- million rose to US$326.7 million in 1980—an in-
ployment, and economic growth and development crease of approximately six and a half times—and
effects make it one of the most important industries had become US$32 ​​billion by 2013 (Ministry of
for any country. Particularly, the development of Tourism, 2013). These Tables demonstrate that
international tourism has some advantages for the tourist market in Turkey continued to grow
developing countries in terms of needed foreign even after 1980.
currency (foreign exchange) and increasing rev- In Turkey, which suffers a constant negative
enues. Tourism is a constantly growing source of balance of trade, tourist revenue assumes a very
commerce, and the market is relatively less stable important role in eliminating the trade deficit—in
or reliable when compared other major industries other words, ensuring the current account balance.
such as manufacturing or the production of basic As seen in Table 1, the deficit in Turkey’s balance
commodities. In addition, the tourism market of international payments has been a problem for
necessarily requires that consumers themselves many years. At the beginning of planned develop-
must travel to the source of the goods or services ment period, Turkey aimed to reduce the deficit in
they wish to consume: the products of or utility the country’s balance of payments through growth
derived from the act of partaking in tourism can- in tourist revenues and tourism development.
not be delivered to the customer. Therefore, it is Factors affecting the number of visitors to the
a more effective import substitution. Finally, for country can be generally sorted into the following
many countries, a strong tourist sector means both categories: number of available tourist facilities,
diversification of the economy and a reduction of global economic development, prices of tourist-
the dependence on traditional exports (Samırkaş oriented products and services, and exchange
& Bahar, 2013). rates. Currency exchange rates in particular have
The tourism sector in Turkey demonstrated significance due to their ability to represent
rapid development, especially after the 1980s. tourist-oriented product and service prices for
One of the most powerful steps taken to foster foreign tourists visiting the country (Uğuz &
this growth was the introduction of “Tourism Topbaş, 2011). The ability of any improvement
Incentive Law No. 2634,” which came into force in the exchange rates to be effective in stimulating
in 1982 (Tosun, 1999). The law incentivised in- tourism depends on the capacity of that country
vestments made in the country’s tourism sector to compete in the global tourism market.

108

The Impact of Exchange Rate on Tourism Industry

Table 1. Foreign Trade Deficit of Turkey’s Tourism Revenue Share in Closure

Balance of Trade Tourism Foreign Trade Deficit Share of Tourism in

Years
(Million $) (Million $) Closure (%)
1985 -2,976 770 25.9
1990 -9,448 2,705 28.6
1995 -13,152 4,046 30.8
2000 -21,959 5,925 27.0
2001 -4,543 8,328 183.3
2002 -7,283 10,021 137.5
2003 -14,010 11,090 79.2
2004 -23,878 13,364 56.0
2005 -33,530 15,83 46.0
2006 -40,941 14,109 34.4
2007 -46,661 15,227 33.0
2008 -63,429 18,405 29.0
2009 -38,730 17,103 44.1
2010 -71,661 16,083 22.4
2011 -105,934 18,044 17.0
2012 -84,066 24,414 29.0
2013 -99,843 27,078 27.1
Source: turizm.gov.tr; tuik.gov.tr

Turkey readily demonstrates its ability to meet includes all the relevant data gathered. This sec-
the demands of this market; in response to any fall tion also introduces and analyses these results.
in exchange rates, the number of foreigners visiting The final section of the paper summarizes and
the country climbs—and so does the demand for evaluates the results.
tourist services. The competitiveness of Turkey’s
tourist sector stems from the reality that there are
a number of national, natural, geographical, and LITERATURE REVIEW
cultural characteristics that cannot be substituted
with or provided by other countries. These features Principal studies that examine the relationship
provide Turkey with a significant competitive between exchange rates and tourist statistics that
advantage compared with other countries seeking are utilized in this chapter can be summarized
tourist revenues (Demirel et al., 2008). briefly as follows: first, Crouch (1994) relates a
This chapter examines the impact that transfor- study which finds that the exchange rate can either
mations in real exchange rates have on the number positively or negatively affect tourism and that the
of tourists visiting Turkey. The chapter is described exchange rate can be used to estimate the demand
in four sections. Following the introduction is a for tourism in a given country. Sinclair & Stabler
literature review. The third section contains the (1997) suggest tourists take the exchange rate into
model used to study the phenomena at hand and account when choosing which locations to visit

109
 
The Impact of Exchange Rate on Tourism Industry

and that an enforced low exchange rate regime arrivals and exchange rate data for the twenty
could promote the growth of tourism even when years between 1990 and 2010. The study highlights
information about relative money values is limited. that the monthly exchange rate volatility for the
Eugenio-Martin & Morales (2004) attempted period was identified with the use of EGARCH
to explain the relationship between economic model, and that exchange rate volatility and tour-
growth and tourism revenues between 1985 and ism demand was studied within the framework
1998 in Latin America with Panel Data Analysis. of a Johansen cointegration analysis. According
Their study proposes that there is little connection to the findings, there is a statistically significant
between tourist revenues, foreign exchange rates, relationship between tourist demand and the ex-
and purchasing power parity. change rate volatility, in the long term.
Gallego et al. (2007), examine the exchange Yap (2012) uses the multivariate conditional
rates effects on international tourism. Covering volatility regression model to examine the effect
ten years, from the beginning of 1995 to the end that the exchange rate volatility had on the number
of 2004, Gallego et al. consider important tourism of tourists entering Australia. In this chapter cover-
destinations in a total of sixty countries—thirty ing January 1991 to January 2011, Yap measured
of which are OECD countries—and attempt to tourist numbers for visitors to the country coming
construct a weighted conventional (gravity) model from China, India, Japan, Malaysia, New Zealand,
using tourism and exchange data. They find that Singapore, South Korea, the United Kingdom, and
less flexible exchange rates serve to stimulate the United States of America, and several others.
tourism mobility and that a fixed exchange rate According to the findings, Malaysia New Zealand
has a positive impact on tourism. are more sensitive than others to fluctuations in
Demirel, Bozdağ & İnci (2008) analysed exchange rates. However, a change in the value of
the impact of fluctuations in exchange rates on the dollar in Australia does not adversely affect
the number of tourists visiting Turkey from the the Australian tourist industry in the long term.
United States of America, Germany, France, and
the United Kingdom. According to the results of
their study, the increase or decrease in the number DATA, METHOD, AND ANALYSIS
of tourists in response to fluctuations in currency
exchange rates is quite high. When analysing the As evidenced by many studies, tourist revenues
effect of a change in the real value of foreign are a source of support to economic development
currencies against the Turkish Lira, they find that for Turkey (Bahar, 2006; Çetintaş & Bektaş, 2008;
there is a delayed effect on the number of tourists Alper, 2008). As a result, it can be said that the
visiting from the United States, no effect on the industry is very important for developing countries
number of tourists visiting from Germany, and an like Turkey. Many countries implement various
immediate and significant effect on the number of tourism policies with the intent of stimulating
tourists arriving from Britain and France. A change tourism income by increasing tourist demand.
in the real exchange rate has a negative impact on Undoubtedly, there are many factors affecting the
the number of tourists visiting. With the exception demand for these services. Primary factors can
of France, there is no evidence that uncertainty include the country’s tourism potential as well
itself about the real exchange rate has any effect as tastes, desires, and preferences of the visitors
on the number of tourists entering the country. themselves. It is also possible that foreign ex-
Uğuz & Topbaş (2011) examine the relation- change rates and fluctuations in the value of any
ship between the exchange rate and the tourism given currency can affect the demand for tourism.
industry in Turkey, referencing monthly tourist It is a reasonable assumption that most tourists

110

The Impact of Exchange Rate on Tourism Industry

are aware of exchange rates when making travel when their first differences are stationary. These
decisions and that they therefore make travel deci- variables can be cointegrated as well, if there
sions based on the movement of currencies. This are one or more linear combinations among the
assumption has led to exchange rates becoming variables that are stationary. If these variables are
one of the prime determinants used for estimating being cointegrated, then there is a constant long-
international tourism demand (Yap, 2012). In this run linear relationship among them (Dritsakis,
chapter, we try to determine if there actually is a 2008). We use Johansen’s maximum eigenvalue
significant relationship between tourism demand and trace tests to defining cointegration relation
and rate of currency exchange. between foreign exchange and tourism demand for
A time series data is used to define a relation- the integrated order one (I(1)) series. Johansen’s
ship between exchange rate and tourism demand. procedure builds cointegrated variables directly on
Many macroeconomic time series contain unit maximum likelihood estimation instead of relying
roots dominated by stochastic trends developed on OLS estimation. This procedure relies heavily
by Nelson & Plosser (1982). Unit roots are impor- on the relationship between the rank of a matrix
tant in examining the stationary of a time series and its characteristic roots. Johansen derived the
because a non-stationary regressor invalidates maximum likelihood estimation using sequential
many standard empirical results (Dritsakis, 2008). tests for determining the number of cointegrat-
If standard regression techniques are applied to ing vectors. We use this procedure to test for the
non-stationary data, the end result could be a re- existence of cointegrating relationships between
gression that looks good under standard measures series group.
(significant coefficient estimates and high R2), but Cointegration analysis gives an account of
which is ultimately valueless. Such a model would whether there is a long-run relationship or not;
be termed a “spurious regression” (Brooks, 2008). however, it does not explain the direction of the
The presence of a stochastic trend is determined relationship. Granger causality developed by
by testing the presence of unit roots in time series Engle & Granger (1987), based on error correc-
data. In this chapter, Augmented Dickey-Fuller tion model, enables us to explain the direction of
(ADF) and Phillips-Perron unit root test are used the relationship. We used the Granger causality
for testing to the series’ stationarity. According test for explaining the direct relationship between
to the unit root tests results, we tried to find coin- foreign exchange rate and tourism demand.
tegration relations for the non-stationary series We examine the relationship between tourism
groups which are stationary after first difference. and foreign exchange rates in two stages. First we
The notion of cointegration was first introduced define the association between tourists’ expendi-
by Granger (1981) and Granger & Weiss (1983). ture abroad and exchange rate. We have chosen
It was further extended and formalised by Engle the average tourism revenue per tourist (PERT)
& Granger (1987). Cointegration describes the and real effective exchange rate index (REX) as
existence of an equilibrium or stationary rela- data for the 2003Q1 - 2013Q4 period. The data on
tionship among two or more time series, each exchange rates was obtained from Central Bank
of which is individually non-stationary. The ad- of the Republic of Turkey and average tourism
vantage of the co-integration approach is that it revenue per tourist was obtained from Turkish
allows integration of the long-run and short-run Statistical Institute. During the second stage we
relationships between variables within a unified tried to find relationship between the foreign cur-
framework (Narayan, 2003). If the time series rency exchange rate and demand for tourism. We
(variables) are non-stationary in their levels, they have created three basic groups according to major
can be integrated with integration of order 1, currencies for the January 2002 - December 2013

111
 
The Impact of Exchange Rate on Tourism Industry

Table 2. Unit Root Tests Results

Augmented Dickey-Fuller
(ADF) Test Statistic
Variables Level/ Intercept Prob Trend and Prob Result
First Difference Intercept
REX Level -2.935557 0.0497** -2.607801 0.2790 I(1)
First Difference -6.743114 0.0000* -5.803222 0.0002* I(0)
PERT Level -2.016610 0.2788 -1.975042 0.5958 I(1)
First Difference 0.0136 0.0136** -3.626205 0.0407** I(0)
*Significant at the 5% level. **Significant at the 10% level.

period. Selected as data were the United States stationarity. The findings of the unit root tests
Dollar and tourist arrivals from USA, the Euro can be found in Table 2. The series in Table 2 are
(EURO) and tourist arrivals from Germany, the checked based on intercept, intercept and trend,
British Pound (GBP) and tourist arrivals from and the results vary according to the implications
United Kingdom. Tourist numbers was obtained of these characteristics for the choice of intercept
from Turkish Statistical Institute. Series are sea- and trend in the unit root test regression. Neither
sonally adjusted. All rates are expressed in real series is stationary at level, but for the model of
terms using the equation 1. the first difference, the series is stationary.
If the time series are nonstationary in their
 CPI f  levels, they can be integrated with integration of
REX = NEX   (1) order one (I(1)), when their first differences are
 CPI d  stationary. These variables can be cointegrated and
it is possible for them to exhibit a long-run linear
REX express real exchange rate, CPIf is foreign relationship. Since it has been determined that the
country’s consumer price index; CPId is Turkey’s variables under examination are integrated of order
consumer price index, and NEX is nominal ex- one (I(1)), the cointegration test is performed. The
change rate. testing hypothesis is the null of non-cointegration
Relationship between Foreign Exchange Rate against the alternative that is the existence of
(REX) and Revenue per Tourist (PERT) cointegration. Johansen cointegration test is used
The first order of business is to investigate for testing series’ cointegration relation.
whether the REX and PERT series are station- The finding of the cointegration test is that
ary. ADF unit root test is used to test a series’ cointegration exists between real exchange rate

Table 3. Johansen Cointegration Results

Null Hypothesis Trace Test Prob Result Null Hypothesis Maximal Prob. Result
Eigenvalue Test
r≤0 20.11119 0.0094 Reject H0 r=0 14.78320 0.0414 Reject H0
r≤1 5.327981 0.0210 Reject H0 r=0 5.327981 0.0210 Reject H0
Note: r is the number of the cointegrating vectors. * Indicates that at 5% level of significance, the null hypothesis, saying that there is
no cointegration relationship between variables is not accepted. Critical values vary based on trend, intercept. A lag of r=1 for VAR was
selected before Johansen cointegration test.

112

The Impact of Exchange Rate on Tourism Industry

Table 4. Granger Causality Test Results

F-Sta. Prob. Result

H0 Hypothesis PERT does not Granger Cause REX. 5.08211 0.0299 Rejected
Alternative PERT does Granger Cause REX. Accepted
Hypothesis
H0 Hypothesis REX does not Granger Cause PERT. 0.49733 0.4849 Accepted
Alternative REX does Granger Cause PERT. Rejected
Hypothesis
* A lag of r=1 for VAR was selected before Granger Causality Test.

and tourism revenue per tourist. It means that there - December 2013 period. Selected as data were
is significant long-run relation between the two the United States Dollar and tourist arrivals from
variables. To explain the direction of this relation, USA, the Euro (EURO) and tourist arrivals from
we used the Granger causality test, and the results Germany, the British Pound (GBP) and tourist
are presented in Table 4. arrivals from United Kingdom (see Table 5).
According to Granger causality test results, First we examined whether all of the groups’
although real exchange rate does not affect tourism series were stationary. An ADF unit root test is
revenue per tourist, tourism revenue per tourist used for testing series’ stationarity. The findings
is affected by the real exchange rate of Turkey. of the unit root tests can be found in Table 6.
The series in Table 5 are checked based on
intercept, intercept and trend, and the results vary
RELATIONSHIP BETWEEN according to the implications of these charac-
FOREIGN EXCHANGE RATE teristics for the choice of intercept and intercept
AND TOURISM DEMAND and trend in the unit root test regression. The unit
root test result shows that Germany and USD
We sought to discover whether there was a rela- series are stationary at level and the other series
tionship between the foreign exchange rate and are not stationary at level, but for the model of
tourism demand by analysing our data through the first difference, the series is stationary. For
with a Johansen cointegration test and a Granger cointegration using Johansen methods, all the
causality test. We created three basic groups ac- series have to be integrated of the same order
cording to major currency for the January 2002 as (I(1)). Thus, we search cointegration relation

Table 5. ­

Variable Description
GERMANY Tourist number arrive from Germany to Turkey
Group 1
EURO Real Exchange rate of Euro (Turkish Lira/Euro)
UK Tourist number arrive from the UK to Turkey
Group 2
GBP Real Exchange rate of British Pound (Turkish Lira/GBP)
USA Tourist number arrive from the USA to Turkey
Group 3
USD Real Exchange rate of USD (Turkish Lira/USD)

113
 
The Impact of Exchange Rate on Tourism Industry

Table 6. ADF Unit Root Tests Results

Augmented Dickey-Fuller
(ADF) test statistic
Trend and
Variables Level/First Difference Intercept Prob Prob Result
Intercept
Level -4.070329 0.0015* -4.053770 0.0091* I(0)
GERMANY First Difference - - - - -
Level -2.376140 0.1503 -2.322787 0.4186 I(1)
EURO First Difference -10.68180 0.0000* -10.67837 0.0000* I(0)
Level -1.637715 0.4607 -1.545223 0.8092 I(1)
UK First Difference -13.27932 0.0000* -13.34425 0.0000* I(0)
Level -2.138640 0.2301 -2.810538 0.1961 I(1)
GBP First Difference -8.924613 0.0000* -8.932037 0.0000* I(0)
Level -1.285234 0.6354 -4.182122 0.0061* I(1)
USA First Difference -10.52484 0.0000* -10.51703 0.0000* I(0)
Level -3.502667 0.0093* -3.532581 0.0397** I(0)
USD First Difference - - - - -
*Significant at the 5% level. **Significant at the 10% level.

only for Group 2 (UK and GBP). The results of The Granger Causality tests of H0 hypothesises
Group 2 Johansen cointegration test results are are accepted for Group 1 and Group 3. It means
summarized in Table 7. there is no relationship between the exchange rate
Trace and Max-eigenvalue test indicates of the Euro to TL and the number of tourists from
one cointegrating vector at the 5% level of sig- Germany who arrive in Turkey as well as there
nificance. The finding of the cointegration test is being no relationship between exchange rate of
that cointegration exists among GBP exchange USD to TL and the number of tourists from the
rate and the number of tourists arriving from the United States of America who arrive in Turkey.
United Kingdom. It means that there is significant
long-run relation between the two variables. To
explain the direction of this relation, we used the CONCLUSION
Granger causality test. The results of this test can
be found in Table 8. Based on the results of previous studies, it is as-
According to the Granger causality test results, sumed that tourism revenue supports to economic
the exchange rate of TL to GBP is not affected by development for Turkey (Bahar, 2006; Çetintaş
the number of tourists from the United Kingdom & Bektaş, 2008; Alper, 2008). Many countries
that visit Turkey. However, the number of tour- implement various tourism policies with the intent
ists from the United Kingdom who visit Turkey of stimulating tourism income by increasing tour-
is affected by the exchange rate of TL to GBP. ist demand. Undoubtedly there are many factors
We also use Granger causality test for the other affecting the demand for these services. Primary
groups, which are not integrated at the same level, factors can include the country’s tourism potential
after making them stationary. The results of these as well as tastes, desires, and preferences of the
tests are summarized in Table 9. visitors themselves. It is also possible that foreign

114

The Impact of Exchange Rate on Tourism Industry

Table 7. Johansen Cointegration Results for UK and GBP

Null Hypothesis Trace Test Prob. Result Null Hypothesis Maximal Prob. Result
Eigenvalue Test
r≤0 17.96695 0.0208 Reject H0 r=0 15.23468 0.0350 Reject H0
Not Not
r≤1 0.0208 0.0983 r=1 2.732266 0.0983
Reject H0 Reject H0
Note: r is the number of the cointegrating vectors. * Indicates that at 5% level of significance, the null hypothesis, saying that there is no
cointegration relationship between variables, is not accepted. Critical values vary based on trend and intercept. A lag of r=2 for VAR was
selected before Johansen cointegration test.

Table 8. Granger Causality Test Results for UK and GBP

F-Sta. Prob. Result

H0 Hypothesis UK does not Granger Cause GBP 3.77391 0.0254 Rejected
Alternative Hypothesis UK does Granger Cause GBP Accepted
H0 Hypothesis GBP does not Granger Cause UK 0.96608 0.3831 Accepted
Alternative Hypothesis GBP does Granger Cause UK Rejected
* Lag length chosen using an SC information criterion as 2 before Granger Causality Test.

Table 9. Granger Causality Test Results for Group 1 (GERMANY and EURO) and Group 3(USA and USD)

F-Sta. Prob. Result

GERMANY does not Granger
H0 Hypothesis 0.73062 0.5355 Accepted
Cause EURO
GERMANY does Granger
Alternative Hypothesis Rejected
Cause EURO
Group 1
EURO does not Granger
H0 Hypothesis 0.24046 0.8680 Accepted
Cause GERMANY
EURO does Granger Cause
Alternative Hypothesis Rejected
GERMANY
USA does not Granger Cause
H0 Hypothesis 0.00382 0.9508 Accepted
USD
USA does Granger Cause
Alternative Hypothesis Rejected
USD
Group 3
USD does not Granger Cause
H0 Hypothesis 0.18661 0.6664 Accepted
USA
USD does Granger Cause
Alternative Hypothesis Rejected
USA
* Lag length 3 for group 1, 1 for group 2. Chosen by using an SC and HQ information criterions.

115
 
The Impact of Exchange Rate on Tourism Industry

exchange rates and fluctuations in the value of any While this may also be true for British tourists,
given currency can affect the demand for tourism. British tourist numbers are definitely affected by
This chapter focused on real exchange rates the real exchange rate of their currency to ours.
and tourist numbers, which represent tourism Test results show the real exchange rate affected
demand. Initially we attempted to answer the both tourist revenue per tourist earned from British
question about whether there is any relationship visitors and British tourist numbers themselves.
between real currency exchange rates and tourism This means that the number of British visitors
revenue per tourist by using Johansen Cointegra- and the money they bring to Turkey during their
tion and Granger causality tests. Results showed visits can be used as determinants of exchange
that revenue per tourist and real exchange rates rate policies for Turkey. This information should
have significant cointegrate relationship in the encourage additional policies aimed at increasing
long-run. They also have a causal relation; real tourism demand in Turkey.
currency exchange rates have an effect upon Tourism demand must be analyzed in detail
where visitors arriving in Turkey originate. Our to supplement further contribution to countries’
tests show that tourism revenue per person can be economical welfare, to use sources in an efficient
one of the determinants of exchange rate policy and productive way and to rise the income and
for Turkey. the share of getting by tourism. The finding of
As well, this chapter answers the question of the tourism demand and the factors affecting the
whether the real exchange rates have an impact on demand make easier the preparation of further
the number of tourists arriving in Turkey from the plans and policies. That’s why, the tourism de-
United States of America, Germany and the United mand, especially in developing countries such
Kingdom. According to our analysis, there is no as Turkey, is one of the paramount factors which
significant relation between exchange rate of Euro provides an economical development and improve-
and number of tourists arriving from Germany ment. Main factor affecting the tourism demand
and exchange rate of USD and number of tourist with regards to economical perspective can be
arriving from United States of America. However, summarized as follows: one’s level of income,
there is significant cointagrate relation between level of price at destination, exchange rates and
exchange rate of GBP and number of tourists ar- transportation cost. In this chapter, only the shifts
riving from United Kingdom. In addition, there in reel exchange on the effect of the tourism de-
is a causal relation: the exchange rate of GBP and mand was analyzed. It’s possible to enhance this
TL has affected the number of tourists from the chapter providing contribution to further studies
United Kingdom who visit Turkey. by taking into consideration the other factors that
Thus we have demonstrated that there is no impress the tourism demand and the changes in
significant relationship between the number of exchange rates.
tourists from Germany and the United States of
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KEY TERMS AND DEFINITIONS Tourism Demand: Tourism demand is defined

as the number of people that plan to buy tour-
Balance of Trade: The difference between a ism products supported by sufficient purchasing
country’s imports and its exports. power and spare time in order to meet tourism
Causality: Causality is the relation between a needs of people.
cause and its effect or between regularly correlated Tourism: Tourism is a travel and accommoda-
events or phenomena. tion event that is made as a consumer in order to
Cointegration: Is an econometric technique meet tourists’ needs in relation to the relaxation,
for testing the correlation between non-stationary entertainment, culture in a place outside the per-
time series variables. manent inhabitation.
Exchange Rate: The price of one currency Turkey: Turkey is a developing country. Tur-
expressed in terms of another currency. key, officially the Republic of Turkey, is located in
Real Exchange Rate: The nominal exchange Western Asia with the portion of Eastern Thrace
rate adjusted for inflation. in South-eastern.

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