Modeling Turkish tourism demand and the exchange rate: The bivariate GARCH approach

Abstract

The primary purpose of this study is to investigate the relationship between tourism demand in Turkey and the exchange rate. Engle's (2002) two stage dynamic conditional correlation GARCH (DCC-GARCH) model is used to estimate the conditional correlations. The analysis of tourism demand from the Eurozone and the USA to Turkey indicates that tourism demand and the exchange rate are positively related. The results also show no clear positive relationship for tourism demand from the UK. In conclusion, tourism destinations are more popular to people from countries when their currency is more valuable.