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Exchange Rate In Tourism And Tourism

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Exchange rate

Tourist arrival is an important economic activity close to the world, particularly developing country like Malaysia. The exchange rate makes for a major part in affecting the performance of economic growth. A strong exchange rate also plays as a catalyst in encouraging and drawing in investment (Asid et al., 2014). The established political atmosphere and stable economic growth have made Malaysia one of the best prospects for tourist arrival. A strong economic growth is an essential condition for tourist arrival in Malaysia.

Variations in the exchange rates, give impact to tourist arrival. Ahmad Kosnan (2012) found that the function of exchange rate and the cost of living are equally important as a devaluation of Ringgit Malaysia …show more content…

Among 80 empirical studies, 286 exchange rate elasticity of demand were examined meta-analytically which results greater insights into the impact of changes in currency exchange rates on the demand for international tourist arrival especially in terms of the range of likely exchange rate elasticity (Crouch, 1993). Changes in exchange rates affect the cost of international travel and tourism. The nominal exchange rate trend has a foreseeable effect on tourist expenditure. Poor changes in exchange rate point to less travel to abroad, travel to another destination, a reduction in expenditure and or duration of travel, changes in the mode or time of travel and a reduction in spending by business travellers. While the constructive exchange rate inspire tourist to more spending on matters which would have been purchased anyway, spending on additional goods and services, a shift in expenditure from other destinations, attraction to new tourists and attraction to border shoppers (Crouch, …show more content…

For the study by Nowjee (2012) found that a 1% increase in tourism arrival contributes to a development in economic growth and vice-versa in Mauritius. Tourism arrival can be improved by devaluating the Mauritian currency as a negative relationship between tourism arrival and real effective exchange rate is found. Tourist expenditure also contribute to the balance of expenses through foreign exchange incomes which generated from tourism arrival and can endure for a significant income source for a national economic structure (Nowjee, 2012). To offsetting current account deficits and negative balance of payments, foreign exchange revenues from the tourism sector aid to make incomes. The purchasing power that increased by valuable currency like the US Dollar or Euro and tourism arrival will brings a positive result to the fiscal balance as the government collects more tax profits. One of advantage of tourism is improving the balance of payments in the phase of tourism profits, which augments foreign reserves, which are applied to reduce the trade deficit while the net transfers rise. These positive effects encourage the improvement of the economic system. The bearing of the exchange rate was primarily important because

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