Correlation Analysis between Tourism Industry and Exchange Rate: A Comparative Study of Korea and the UK during the COVID-19 Era

Abstract

Purpose: This study aims to investigate the correlation analysis between the aviation industry and the exchange rate of South Korea and the UK during the COVID-19 pandemic Era by applying the Vector Autoregression (VAR) model. Theoretical Framework: Research examined the correlation between the aviation industry and exchange rates in South Korea and the UK. Vector Autoregression (VAR) model was developed and daily data from January 01, 2020, to July 05, 2023, were collected from the official website for the research. Design/Methodology/Approach: The paper analyzes relationships among time-series variables using the VAR model. This analysis consisted of four steps, step 1, collecting data; step 2, data preprocessing; step 3, developing VAR model; and step 4, investigation. Findings: The analysis revealed a significant positive correlation between exchange rate fluctuations and the Korean aviation industry. In contrast, the UK aviation industry exhibited a significant negative correlation with exchange rate fluctuations. Research, Practical & Social Implications: This study contributes to existing literature on tourism and exchange rates during the COVID-19 pandemic, emphasizing the need for comparative analysis. According to the results, this study suggests Airlines can partner with financial institutions to offer financial products for passengers to book at desirable rates. Originality/Value: This paper successfully filled in the gaps in the research by providing a scientific and critical investigation of correlation analysis between the aviation industry and the exchange rate of South Korea and the UK during the COVID-19 pandemic Era.