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Tourism as an Automatic Stabilizer

Par : Type de matériel : TexteTexteLangue : français Détails de publication : 2014. Sujet(s) : Ressources en ligne : Abrégé : This article examines how the damaging effects of a sudden stop in foreign capital inflow are attenuated in a small open economy with an important tourism sector. The economic weight is weaker in the case of sectors that produce internationally exchangeable goods that are especially vulnerable to an increase in the price of foreign capital. The decrease in the price of non-internationally exchangeable goods, resulting from the stop in capital inflow, has the effect of drawing more tourists, whose spending in turn attenuates this decrease and facilitates a redeployment of the economy towards the sectors producing these goods. These stabilizing effects increase with the price elasticity of the function of tourism demand, that is to say, when the services offered to tourists in the studied economy are substitutable by those proposed by other destinations.
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This article examines how the damaging effects of a sudden stop in foreign capital inflow are attenuated in a small open economy with an important tourism sector. The economic weight is weaker in the case of sectors that produce internationally exchangeable goods that are especially vulnerable to an increase in the price of foreign capital. The decrease in the price of non-internationally exchangeable goods, resulting from the stop in capital inflow, has the effect of drawing more tourists, whose spending in turn attenuates this decrease and facilitates a redeployment of the economy towards the sectors producing these goods. These stabilizing effects increase with the price elasticity of the function of tourism demand, that is to say, when the services offered to tourists in the studied economy are substitutable by those proposed by other destinations.

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