Impact of Exchange Rate Regime on International Tourists’ Inflow in South Africa

Abstract

Globally, research on exchange rate regimes have mainly centred on their influences on international trade flows, foreign direct investment, and economic growth while the empirical nexus between exchange rate regimes and international tourists’ inflow has been scarcely explored in South Africa. The country has consistently witnessed an increasing inflow of tourists since the 1990s to date, hence, the importance of international tourism inflow in South Africa cannot be overemphasised as it has implications on the economy, employment generation, and as a source of revenue. Also, the nexus between the exchange rate regime and international tourism inflow in South Africa has not garnered sufficient empirical attention. Therefore, this research investigates the impact of the exchange rate regime on international tourists’ inflow in South Africa over the period 1990 to 2020. Secondary data on the international tourists’ receipt, GDP income per capita, inflation rate, and exchange rate were derived from the World Bank Development Indicators while the binary variable is used as a measure of the exchange rate regime. The collected data was analysed using the ordinary least squares (OLS). Findings from the study reveal that the existing floating exchange rate regime supports the international tourists’ inflow, but its significant impact as a major driver of inflow is yet to be felt in South Africa. The study, however, established that per capita GDP and domestic exchange rate depreciation significantly promote international tourists’ inflow in the country.

Keywords

• exchange rate regime
• international tourists’ inflow
• ols
• south africa