Abstract
This study investigates the influence of exchange rate (nominal and real effective) fluctuations on tourism demand in South Africa between 1994 and 2023. The study employed the Nonlinear Autoregressive Distributed Lag (NARDL) model to analyse how currency appreciation and depreciation affect the influx of international tourists in South Africa.
The results show that when the South African Rand weakens (depreciates), it attracts more tourists, while a stronger Rand (appreciation) slightly reduces tourist arrivals in South Africa. Furthermore, the study shows that interest rates positively affect tourism demand, highlighting the importance of a stable economy for tourism growth.
This research contributes to understanding the link between exchange rates and tourism by showing how economic factors influence destination appeal. It offers practical advice for policymakers, such as using weaker currency periods to promote affordable tourism and countering strong currency effects with targeted marketing. The study shows that attracting tourists from many different countries and improving infrastructure can help reduce the impact of exchange rate changes. These ideas can help developing countries create better plans to grow their tourism industry.
This study is among the limited number of studies exploring the asymmetric impacts of nominal and real effective exchange rates on tourism demand. Notably, it is the first to apply the non-linear ARDL approach to investigate the impacts of both nominal and real effective exchange rates on tourism demand within the South African context.