A general equilibrium analysis of the economic impact of a devaluation on tourism: The case of Fiji

Stephen Albert Pratt

Research output: Journal article publicationJournal articleAcademic researchpeer-review

14 Citations (Scopus)

Abstract

Policymakers often see a currency devaluation as a means of increasing a country's exports, providing a boost to economic activity. In an economy where tourism exports are significant, a devaluation will make tourism more competitive, providing a stimulus to the economy through tourism exports. Imports will be more expensive, which is often seen as an inflationary side-effect of the export stimulus. Results from a computable general equilibrium model of Fiji indicate that, while devaluation will increase tourism consumption, the overall effect on the economy will be contractionary, as household consumption, investment and domestic production will all decrease. Policymakers and central banks need to consider the full economywide impacts of a currency devaluation when determining the overall benefit to the economy.
Original languageEnglish
Pages (from-to)389-405
Number of pages17
JournalTourism Economics
Volume20
Issue number2
DOIs
Publication statusPublished - 1 Jan 2014

Keywords

  • Computable general equilibrium model
  • Devaluation
  • Fiji
  • Tourism consumption

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Tourism, Leisure and Hospitality Management

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