Prague Economic Papers 2020, 29(6):710-728 | DOI: 10.18267/j.pep.748

Impact of Export of Travel Services on Current Account Balance and Growth in Mediterranean Countries

Maja Bacovica, Danijela Jacimovica, Julija Cerovic Smolovica
a University of Montenegro, Faculty of Economics, Montenegro

Observing the expanding and high share of export of travel services in both GDP and total export of services in Mediterranean countries, we focus our research on travel service export in twelve countries from 1998 to 2018. We investigated both short-term and long-term significance of export of travel services for GDP growth in Mediterranean countries using the VAR and VECM model and the fixed-effects panel OLS model. In our analysis of significance of export of travel services on current account balance, we applied an accounting approach. Our application of the fixed-effects OLS model on the panel data with GDP growth rate as the dependent variable has shown that, in the short run, export of travel services has a positive impact on GDP growth. In the long run, Granger causality based on block exogeneity Wald tests evidenced that export of travel services has a positive impact on GDP growth, but only at the 10% significance level. Following the accounting approach in our analysis of impact of export of travel services on overall current account balance, we evidenced a strong relevance of export of travel services in achieving current account balance equilibrium.

Keywords: Export of travel services, current account balance, growth, Mediterranean countries
JEL classification: F14, F32, F43

Received: July 22, 2019; Revised: January 14, 2020; Accepted: February 13, 2020; Prepublished online: June 24, 2020; Published: November 27, 2020  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Bacovic, M., Jacimovic, D., & Cerovic Smolovic, J. (2020). Impact of Export of Travel Services on Current Account Balance and Growth in Mediterranean Countries. Prague Economic Papers, 29(6), 710-728. doi: 10.18267/j.pep.748
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Alp, E., Gene, E. (2015). The Relation between Current Account Deficit and Tourism: The Case of Turkey. International Journal of Economics and Financial Issues, 5(2), 448-453.
    2. Arslanturk, Y., Atan, S. (2012). Dynamic Relation between Economic Growth, Foreign Exchange and Tourism Income: An Econometric Perspective on Turkey. Journal of Business, Economics & Finance, 1(1), 30-37.
    3. Arslanturk, Y., Balcilar, M., Ozdemir, Z. (2011). Time-varying Linkages between Tourism Receipts and Economic Growth in a Small Open Economy. Economic Modelling, 28(1-2), 664-671, https://doi.org/10.1016/j.econmod.2010.06.003 Go to original source...
    4. Aslan, A. (2014). Tourism Development and Economic Growth in the Mediterranean Countries: Evidence from Panel Granger Causality Tests. Current Issues in Tourism, 17(4), 363-372, https://doi.org/10.1080/13683500.2013.768607 Go to original source...
    5. Badulesku, A., Silmut, R., Badulesku, D. (2018). The Complex Relationship between International Tourism Demant and Economic Growth: An Analysis on Central and Eastern European Economics. Amfiteatry Economic, 20(12), 935-950, https://doi.org/10.24818/EA/2018/S12/935 Go to original source...
    6. Bahar, O., Bozkurt, K. (2010). Tourism and Economic Growth Relationship in Developing Countries: Dynamic Panel Data Analysis. Anatolia: Turizm Araştirmalari Dergisi, 21(2).
    7. Balaguer, J., Cantavella-Jorda, M. (2002). Tourism as a Long-run Economic Growth Factor: the Spanish Case. Applied Economics, 34(7), 877-884, https://doi.org/10.1080/00036840110058923 Go to original source...
    8. Calderon, C., Chong, A., and Loayza, N. (2002). Determinants of Current Account deficits in Developing Countries. The B.E. Journal of Macroeconomics 2(1). https://doi.org/10.2202/1534-6005.1021 Go to original source...
    9. Celik, A., Ozcan, S., Topcuoglu, A., et al. (2013). Effects of the Tourism Industry on the Balance of Payments Deficit. Anatolia, An International Journal of Tourism and Hospitality Research, 24(1), 86-90, https://doi.org/10.1080/13032917.2013.772529 Go to original source...
    10. Cetintas, H., Bektas, C. (2008). Türkiye'de Turizm ve Ekonomik Büyüme Arasindaki Kisa ve Uzun Dönemli İlişkiler (The Long and Short Term Relationships between Tourism and Economic Growth in Turkey). Anatolia: Turizm Araştirmalari Dergisi, 19(1), 37-44.
    11. Cihangir, M., Erkan, B., Harbahougly, M. (2014). The Effect on Current Account on Net Tourism Revenues in Turkey. European Scientific Journal, 10(3).
    12. Cortes-Jimenez, I., Pulina, M. (2010). Inbound Tourism and long-run economic growth. Current Issues in Tourism, 13(1), 61-74, https://doi.org/10.1080/13683500802684411 Go to original source...
    13. Cusolito, A., Nedeljkovic, M. (2013). Toolkit for the Analysis of Current Account Imbalances. Washington, DC: The World Bank.
    14. Devadas, S., Loyaza, N. (2018). When is a Current Account Deficit Bad? The World Bank. Available at: http://documents.worldbank.org/curated/en/507731538487989157/When-is-a-Current-Account-Deficit-Bad
    15. Diaz de la Guardia, C., Molero Zayas, J., Valadez, P. (2005). International Competitiveness in Services in Some European Countries: Basic Facts and a Preliminary Attempt of Interpretation. Working Paper No. 01/05.
    16. Durbarry, R. (2004). Tourism and Economic Growth: The Case of Mauritius. Tourism Economics, 10(4), 389-401, https://doi.org/10.5367/0000000042430962 Go to original source...
    17. Engle, R. F., Granger, C. W. J. (1987). Co-integration and Error-Correction: Representation, Estimation and Testing. Econometrica, 55(2), 251-276, https://doi.org/10.2307/1913236 Go to original source...
    18. Eugenio-Martin, J. L., Morales, N. M., Scarpa, R. (2004). Tourism and Economic Growth in Latin America Countries: A Panel Data Approach. FEEM. Working Paper No. 26.2004, https://doi.org/10.2139/ssrn.504482 Go to original source...
    19. Formica, S., Uysal, M. (1996). The Revitalization of Italy as a Tourist Destination. Tourism Management, 17(5), 323-331, https://doi.org/10.1016/0261-5177(96)00032-5 Go to original source...
    20. Francois, J., Hoekman, B. (2010). Services Trade and Policy. Journal of Economic Literature, 48, 642-692, https://doi.org/10.1257/jel.48.3.642 Go to original source...
    21. Gable Lundstrom, S., Mishra, S. (2011). Service Export Sophistication and Europe's New Growth Model. The World Bank. Policy Research Working Paper No 5793, https://doi.org/10.1596/1813-9450-5793 Go to original source...
    22. Gafar, J. (1978). An Analysis of Import Substitution in a Developing Economy: the Case of Jamaica. Caribbean Studies, 18(3/4), 139-156.
    23. Gokovali, U., Bahar, O. (2006). Contribution of Tourism to Economic Growth: A Panel Data Approach. Anatolia: An International Journal of Tourism and Hospitality Research, 17(2), 155-167, https://doi.org/10.1080/13032917.2006.9687184 Go to original source...
    24. Hall, D. R. (1998). Tourism Development and Sustainability Issues in Central and South-eastern Europe. Tourism Management, 19(5), 423-431, https://doi.org/10.1016/s0261-5177(98)00039-9 Go to original source...
    25. Herzer, D., Nowak-Lehmann, F., Siliverstovs, B. (2006). Export-led Growth in Chile: Assessing the Role of Export Composition in Productivity Growth. The Developing Economies, 44(3), 306-328, https://doi.org/10.1111/j.1746-1049.2006.00019.x Go to original source...
    26. Holtz-Eakin, D., Newey, W., Rosen, H. S. (1988). Estimating Vector Autoregressions with Panel Data. Econometrica, 56(6), 1371-1395, https://doi.org/10.2307/1913103 Go to original source...
    27. Hundt, A. (1996). Impact of Tourism Development on the Economy and Health of Third World Nations. Journal of Travel Med, 3(2), 107-112, https://doi.org/10.1111/j.1708-8305.1996.tb00715.x Go to original source...
    28. IMF (2018). Lifting Growth in the Western Balkans - the Role of Global Value Chains and Services Exports. Washington, D.C: International Monetary Fund.
    29. Ivanov, S., Webster, C. (2006). Measuring the Impact of Tourism on Economic Growth. Tourism Economics, 13(3), 379-388, https://doi.org/10.5367/000000007781497773 Go to original source...
    30. Kalaitzi, A. S., Cleeve, E. (2018). Export-led Growth in UAE: Multivariate Causality between Primary Exports, Manufactured Exports and Economic Growth. Eurasian Business Review, 8(3), 341-365, https://doi.org/10.1007/s40821-017-0089-1 Go to original source...
    31. Kao, C. (1999). Spurious Regression and Residual-Based Tests for Cointegration in Panel Data. Journal of Econometrics, 90(1), 1-44, https://doi.org/10.1016/s0304-4076(98)00023-2 Go to original source...
    32. Konan, D. E., Maskus, K. E. (2016). Quantifying the Impact of Services Liberalization in a Developing Country. World Bank Policy. Research Working Paper No. 3193.
    33. Kordalska, A., Olczyk, M. (2018). CEE Trade in Services: Value Added versus Gross Terms Approaches. Eastern European Economics, 56(4), 269-291, https://doi.org/10.1080/00128775.2018.1459194 Go to original source...
    34. Krenz, A. (2014). Services Sectors Concentration and Countries Specialization Patterns in the European Union: A Comparative Analysis with a Special Focus on France, Germany, Greece and the UK. Regional and Sectoral Economic Studies, 14(1), 23-32.
    35. Kulendran, N., Wilson, K. (2000). Is there a Relationship between International Trade and International Travel? Applied Economics, 32(8), 1001-1009, https://doi.org/10.1080/000368400322057 Go to original source...
    36. Lee, C.-C., Chang, C.-P. (2008). Tourism Development and Economic Growth: A Closer Look at Panels. Tourism Management, 29(1), 180-192, https://doi.org/10.1016/j.tourman.2007.02.013 Go to original source...
    37. Lorde, T., Lowe, S., Francis, B. (2010). Do Tourism Receipts Contribute to the Sustainability of Current Account Deficits in Barbados? CBB. Working Paper, pp. 1-36.
    38. Loungani, P., Mishra, S., Papageorgiou, C., et al. (2017). World Trade in Services: Evidence from a New Dataset. International Monetary Fund. Washington, D.C Working Paper No. 17/77, https://doi.org/10.5089/9781475589887.001 Go to original source...
    39. Mann, C. L. (2004). The US Current Account, New Economy Services, and Implications for Sustainability. Review of International Economics, 12(2), 262-276, https://doi.org/10.1111/j.1467-9396.2004.00448.x Go to original source...
    40. Mishra, S., Lundstrom, S., Rahul, A. (2011). Sophistication in Service Exports and Economic Growth. The World Bank/Economic Premise, No.55. Go to original source...
    41. Moro, A. (2015). Structural Change, Growth and Volatility. American Economic Journal: Macroeconomics, 7(3), 259-294, https://doi.org/10.1257/mac.20130057 Go to original source...
    42. Papadopoulos, S. I., Mirza, H. (1985). Foreign Tourism in Greece: An Economic Analysis. Tourism Management, 6(2), 125-137, https://doi.org/10.1016/0261-5177(85)90021-4 Go to original source...
    43. Pitre, V., Argade, L. (1988). Measurement of Import Substitution: A sceptical Note. Economic and Political Weekly, 23(5), 215-220.
    44. Priniotaki, I., Kapsisi, S. (2008). Democratization Process And Tourism Industry At The Region Of West Balkans: Tourism as a Socio-political Force. Annals of the University of Oradea, Economic Science Series, 17(1), 450-462.
    45. Proenca, S., Soukiazis, E. (2008). Tourism as an Economic Growth Factor: a Case Study for Southern European Countries. Tourism Economics, 14(4), 791-806, https://doi.org/10.5367/000000008786440175 Go to original source...
    46. Samimi, A., Sadeghi, S., Sadeghi, S. (2011). Tourism and Economic Growth in Developing Countries: P-VAR Approach. Middle-East Journal of Scientific Research, 10(1), 28-32.
    47. Santos-Paulino, A. U. (2011). Trade Specialization, Export Productivity and Growth in Brazil, China, India, South Africa, and a Cross Section of Countries. Economic Change and Restructuring, 44(1-2), 75-97, https://doi.org/10.1007/s10644-010-9087-3 Go to original source...
    48. Sequeira, T., Campos, C. (2005). International Tourism and Economic Growth: A Panel Data Approach. FEEM. Working Paper No. 141.05, https://doi.org/10.2139/ssrn.855985 Go to original source...
    49. Steingress, W. (2015). Specialization Patterns in International Trade. Banque de France. Working Paper No. 542, https://doi.org/10.2139/ssrn.2579591 Go to original source...
    50. Thano, R. (2015). The Impact of Tourism on the Balance of Payments. American Journal of Economics, Finance and Management, 1(5), 529-536.
    51. Timmer, M., Miroudot, S., Gaaitzven, J. (2019). Functional Specialization in Trade. Journal of Economic Geography, 19(1), 1-30, https://doi.org/10.1093/jeg/lby056 Go to original source...
    52. Walterskirchen, E. (1998). High Economic Growth in 1998, but Increasing Risks in 1999. Economic Outlook for 1998 and 1999. Austrian Economic Quarterly, 3(4), 167-175.
    53. World Economic Forum (2017). The Travel & Tourism Competitiveness Report 2017. Geneva: World Economic Forum.

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content