An investigation of demand and exchange rate shocks in the tourism sector

Purpose This study aims to measure the relationship between demand and exchange rate shocks in tourism industry. Design/methodology/approach A panel data set is constructed covering period 1995 2017, includes top 26 countries that host 10 million tourists above world as of 2017. The standard errors series are used an indicator shocks. First, cross-sectional dependency, stationarity homogeneity examined; second, a cointegration analysis implemented; third, long-term coefficients analyzed with Dynamic Common Correlated Effects (DCCE) approach; and, finally, Dumitrescu Hurlin’s (2012) Granger non-causality test detect causality. Findings preliminary analyses show variables dependent heterogeneous stationary their first difference; hence, effects temporary. On other hand, result analysis, it found both cointegrated over long-term. However, estimated DCCE approach not be statistically significant. Finally, test, concluded there causality running from Originality/value To best authors’ knowledge, rates has been investigated before, therefore, this considered pioneering will contribute literature.