Asymmetrical Exchange Rates Effect on Indonesia's Trade Balance in Tourism

Akbar Maulana, Taufiq Carnegie Dawood, Teuku Zulham


The main objective of this research is to analyze the effect of depreciation and real exchange rate appreciation on Indonesia's tourism trade balance bilaterally against Australia, China, Japan, Malaysia, and Singapore. Such analysis on bilateral relations have never been studied for developing markets countries, namely Indonesia. This study uses a linear ARDL approach and a nonlinear ARDL approach with the dependent variable on the tourism trade balance and the real exchange rate as independent variables. Income, foreign direct investment (FDI), and natural disasters as control variables. The empirical results show that Chinese and Japanese tourists respond positively to the depreciation in the real currency rate of exchange, thereby increasing Indonesia's tourism trade balance. Nonlinear ARDL shows that the relation concerning the real rate of exchange plus the balance of trade is non-symmetrical with respect to China and Japan, while Australia, Malaysia, and Singapore are symmetrical. These results suggest that the government should formulate policies to increase tourist visits from China and Japan. Further empirical results also found a J-curve pattern in Indonesia-China and Indonesia-Japan.


Tourism Trade Balance; Real Exchange Rate; Nonlinier ARDL; J-curve

Full Text:



Agiomirgianakis, G., Bertsatos, G., & Tsounis, N. (2018). Asymmetric responses in the tourism demand function, Journal of Economic Asymmetries. doi: 10.1016/j.jeca.2018.e00103.

Ari, A., Cergibozan, R. & Cevik, E. (2019). J-curve in Turkish bilateral trade: A nonlinear approach, International Trade Journal. doi: 10.1080/08853908.2018.1521316.

Indonesian Central Statistics Agency (2019) Statistik Indonesia 2019, Katalog BPS.

Bahmani-Oskooee, M. (1985). Devaluation and the J-Curve: Some Evidence from LDCs, The Review of Economics and Statistics. doi: 10.2307/1925980.

Bahmani-Oskooee, M. & Arize, A. C. (2019). U.S.-Africa trade balance and the J-curve: An asymmetry analysis, International Trade Journal. doi: 10.1080/08853908.2019.1570881.

Bahmani-Oskooee, M., Economidou, C., & Goswami, G. G. (2006). Bilateral J-curve between the UK vis-à-vis her major trading partners, Applied Economics. doi: 10.1080/00036840500399388.

Bahmani-Oskooee, M., & Fariditavana, H. (2016) Nonlinear ARDL Approach and the J-Curve Phenomenon, Open Economies Review. doi: 10.1007/s11079-015-9369-5.

Bahmani-Oskooee, M., Halicioglu, F. & Hegerty, S. W. (2016). Mexican bilateral trade and the J-curve: An application of the nonlinear ARDL model, Economic Analysis and Policy. doi: 10.1016/j.eap.2016.02.003.

Bahmani-Oskooee, M., & Harvey, H. (2019). The J-curve and bilateral trade balances of Indonesia with its major partners: are there asymmetric effects?, New Zealand Economic Papers. doi: 10.1080/00779954.2017.1371207.

Bahmani-Oskooee, M., & Hegerty, S. W. (2010). The J- and S-curves: A survey of the recent literature, Journal of Economic Studies. doi: 10.1108/01443581011086639.

Bhati, A., Upadhayaya, A., & Sharma, A. (2016). National disaster management in the ASEAN-5: an analysis of tourism resilience, Tourism Review. doi: 10.1108/TR-12-2015-0062.

Branson, W. H. (1972). The Trade Effects of the 1971 Currency Realignments, Brookings Papers on Economic Activity. doi: 10.2307/2534114.

Chen, Y. (2017). China’s Tourism-Led Foreign Direct Investment Inflows: An Empirical Study, Modern Economy. doi: 10.4236/me.2017.81004.

Cheng, K. M., Kim, H. & Thompson, H. (2013) The real exchange rate and the balance of trade in US tourism, International Review of Economics and Finance. doi: 10.1016/j.iref.2012.06.007.

Chi, J. (2015). Dynamic impacts of income and the exchange rate on US tourism, 1960-2011, Tourism Economics. doi: 10.5367/te.2014.0399.

Daniel, A. & Rodrigues, P. M. M. (2011). Modelling Tourism demand in Portugal’, Tourism Economics: Impact Analysis, 79–94.

Dogru, T., Isik, C., & Sirakaya-Turk, E. (2019). The balance of trade and exchange rates: Theory and contemporary evidence from tourism, Tourism Management. doi: 10.1016/j.tourman.2019.01.014.

Dogru, T. & Sirakaya-Turk, E. (2018). Modeling Turkish outbound tourism demand using a dynamic panel data approach, Tourism and Hospitality Research. doi: 10.1177/1467358416663822.

Dogru, T., Sirakaya-Turk, E., & Crouch, G. I. (2017). Remodeling international tourism demand: Old theory and new evidence, Tourism Management. doi: 10.1016/j.tourman.2016.11.010.

Eugenio-Martin, J. L., & Campos-Soria, J. A. (2011). Income and the substitution pattern between domestic and international tourism demand, Applied Economics. doi: 10.1080/00036840903299698.

Huang, J. H. & Min, J. C. H. (2002). Earthquake devastation and recovery in tourism: The Taiwan case, Tourism Management. doi: 10.1016/S0261-5177(01)00051-6.

Irandoust, M. (2019). On the relation between exchange rates and tourism demand: A nonlinear and asymmetric analysis, Journal of Economic Asymmetries. doi: 10.1016/j.jeca.2019.e00123.

Işik, C., Radulescu, M., & Fedajev, A. (2019). The effects of exchange rate depreciations and appreciations on the tourism trade balance: The case of Spain, Eastern Journal of European Studies.

Karimi, M. S., Khan, A. A. & Karamelikli, H. (2019). Asymmetric effects of real exchange rate on inbound tourist arrivals in Malaysia: An analysis of price rigidity, International Journal of Tourism Research, 21(2), 156–164. doi: 10.1002/jtr.2249.

Loganatan, N. et al. (2019). The effects of exchange rate, price competitiveness indices and taxation on international

tourism demand in Malaysia, Economics and Sociology. doi: 10.14254/2071-789X.2019/12-3/6.

Magee, S. P. (1973). Currency Contracts, Pass-Through, and Devaluation, Brookings Papers on Economic Activity. doi: 10.2307/2534091.

Mazzocchi, M. & Montini, A. (2001) ‘Earthquake effects on tourism in Central Italy’, Annals of Tourism Research. doi: 10.1016/S0160-7383(01)00008-1.

Meo, M. S. et al. (2018). Asymmetric impact of oil prices, exchange rate, and inflation on tourism demand in Pakistan: new evidence from nonlinear ARDL, Asia Pacific Journal of Tourism Research. doi: 10.1080/10941665.2018.1445652.

Nash, D. (1981). Tourism as an anthropological subject, Current Anthropology. doi: 10.1086/202722.

Ongan, S. & Özdemir, D. (2018). The Asymmetric Effects of Exchange Rates on the US Tourism Balances in the NAFTA Countries: An Application of The Nonlinear ARDL Approach, Journal of Applied Economics and Business Research JAEBR.

Peng, B. et al. (2015). A Meta-Analysis of International Tourism Demand Elasticities, Journal of Travel Research. doi: 10.1177/0047287514528283.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships, Journal of Applied Econometrics. doi: 10.1002/jae.616.

Ravinthirakumaran, K. et al. (2019). Tourism and Foreign Direct Investment Inflows in Sri Lanka, South Asia Economic Journal. doi: 10.1177/1391561419858475.

Rose, A. K. & Yellen, J. L. (1989). Is there a J-curve?, Journal of Monetary Economics. doi: 10.1016/0304-3932(89)90016-0.

Rosselló, J., Becken, S. & Santana-Gallego, M. (2020). The effects of natural disasters on international tourism: A global analysis, Tourism Management. doi: 10.1016/j.tourman.2020.104080.

Serra, J., Correia, A., & Rodrigues, P. M. M. (2014). A comparative analysis of tourism destination demand in Portugal, Journal of Destination Marketing and Management. doi: 10.1016/j.jdmm.2013.10.002.

Shah, A. & Majeed, M. T. (2014). Real Exchange Rate and Trade Balance in Pakistan: An ARDL Co-integration Approach, MPRA Paper No. 57674.

Sharifpour, M. et al. (2014). Investigating the Role of Prior Knowledge in Tourist Decision Making: A Structural Equation Model of Risk Perceptions and Information Search, Journal of Travel Research. doi: 10.1177/0047287513500390.

Shin, Y., Yu, B. & Greenwood-Nimmo, M. (2014). Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework, in Festschrift in honor of Peter Schmidt, 281–314.

Surugiu, C., Leitão, N. C., & Surugiu, M. R. (2011) ‘A Panel data modelling of international tourism demand: Evidences for Romania, Ekonomska Istrazivanja. doi: 10.1080/1331677X.2011.11517450.

Tang, J. et al. (2016). Modelling dependence between tourism demand and exchange rate using the copula-based GARCH model, Current Issues in Tourism. doi: 10.1080/13683500.2014.932336.

Tribe, J. (2009) Philosophical issues in tourism, Philosophical Issues in Tourism. doi: 10.1016/j.tourman.2010.05.002.

Trumbo, C. W. et al. (2016). A Cognitive-Affective Scale for Hurricane Risk Perception, Risk Analysis. doi: 10.1111/risa.12575.

Tung, L. T. (2019). Does exchange rate affect the foreign tourist arrivals? Evidence in an emerging tourist market, Management Science Letters. doi: 10.5267/j.msl.2019.5.001.

Wang, L. & Tang, X. (2018). Does RMB exchange rate volatility affect Beijing’s inbound tourism development?, in 2018 4th International Conference on Information Management, ICIM 2018. doi: 10.1109/INFOMAN.2018.8392836.

Weisath, L., Knudsen, Ø., & Tonnessen, A. (2002) ‘Technological disasters, crisis management and leadership stress, in Journal of Hazardous Materials. doi: 10.1016/S0304-3894(02)00036-5.

Williams, A. M. & Baláž, V. (2015). Tourism Risk and Uncertainty: Theoretical Reflections, Journal of Travel Research. doi: 10.1177/0047287514523334.

World Travel & Tourism Council (2018) Travel & Tourism Economic Impact 2018 World, Travel and Tourism Impact 2018. doi: 10.1093/elt/ccr029.

World Travel & Tourism Council - WTTC (2019) ‘Travel and tourism: world economic impact 2019’, Current Issues in Tourism. doi: 10.2167/cit/mp004.0.

WTTC (2016) Travel & Tourism In ASEAN.



  • There are currently no refbacks.

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.