Determinants of argentinean tourism demand in Uruguay

Abstract

In Uruguay total yearly tourists represent about 90% of its population of which historically 60% or more have come from Argentina. Tourist activities have a great impact on Uruguayan economy. They represent about 4% of Uruguayan GDP and generate near 6% of total employment and 14% of total exports. For this reason it is important to analyze the determinants behind tourism demand. In this paper we study the relationship between the number of Argentinean tourists in Uruguay, their real expenditure, Argentinean GDP and the real exchange rate (RER) between Uruguay and Argentina trying to find long-run relationships between variables, following Johansen methodology. We found two cointegration relationships, through Vector error correction models (VECM). In the first one we include real tourism expenditure, Argentinean GDP and the RER between Argentina and Uruguay. In the second one, we try to estimate the number of Argentinean tourists, using monthly dada of tourists, a monthly indicator of Argentinean activity and the RER between Uruguay and Argentina. The model\2019s forecast indicates a slight decrease of Argentinean tourism expenditure in 2014 and a recovering for 2015.