Abstract

 
 
 
 The main objective of this paper is to estimate the tourism demand for Mexico and Uruguay, two very different countries, but for both of which tourism is an important activity, and mainly originating from a large neighbor. We try to analyze whether the determinants of tourism demand differ depending on the size of the country, or if being a neighboring country is the main determinant. So, we analyze the relationship between the number of American tourists visiting Mexico and Argentinian tourists visiting Uruguay, and the inbound tourists’ income and the bilateral real exchange rate (RER) between the visiting country and the hosting country, following the Johansen’s methodology. We found one cointegration relationship for each country, where the income-elasticity was greater than 2 for American tourists visiting Mexico, and nearly 3 for Argentinian tourists visiting Uruguay. Bilateral RERs were also significant in both models. Moreover, forecasts show the impacts of institutional changes on the tourism sector. The impact of arrival of President Macri to power was positive for Argentinian tourists visiting Uruguay, but President Trump's arrival in the US was negative for American tourists visiting Mexico.
 
 
 
Highlights
Tourism is an important engine of the economic growth and development of countries (Brida Lanzilotta & Risso, 2010; Tang & Tan, 2013; Schubert, Pablo-Romero & Molina, 2013; Schubert, Brida & Risso, 2011; WTTC, 2011; Desplas, 2010)
The second section intends to describe the importance of tourism in Mexico and in Uruguay; section three presents the background and analysis framework; in section four we describe data and methodology
Crouch (1995) find 80 empirical studies on the demand function for tourism while Song and Li’s (2008) review published studies on modeling and predicting tourism demand since 2000. Most of these studies focused on income from outbound countries and the relative price of exported tourism services as the main determinants of tourism demand
Summary
Tourism is an important engine of the economic growth and development of countries (Brida Lanzilotta & Risso, 2010; Tang & Tan, 2013; Schubert, Pablo-Romero & Molina, 2013; Schubert, Brida & Risso, 2011; WTTC, 2011; Desplas, 2010). Crouch (1995) find 80 empirical studies on the demand function for tourism while Song and Li’s (2008) review published studies on modeling and predicting tourism demand since 2000 Most of these studies focused on income from outbound countries and the relative price of exported tourism services as the main determinants of tourism demand. Martins, Gan and Ferreira-Lopes (2017) consider three econometric models to determine the relationship between macroeconomic variables and tourism demand They found that world GDP per capita is more important when explaining arrivals, but relative prices become more important when they use expenditures as the proxy for tourism demand
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