Thursday, December 27, 2012

European tourism and the Euro

If you have traveled across Europe before the introduction of the Euro, you have certainly been annoyed by the frequent changing of currencies. Not only did you need to worry about getting cash at the border, you also had tp learn about new denominations, rethink the prices you see, and end up with unused loose change (ignoring the exchange risk one faces as well). With the introduction of the Euro, all this has been greatly simplified, even if not all countries joined. Beyond the convenience for the tourist, has this spurred additional tourism.

María Santana Gallego, Jorge Vicente Pérez Rodríguez and Francisco Jos&e;eacut Ledesma Rodríguez ask this question and find that, yes, it had a positive impact, to the tune of 20 to 40% for EMU country tourist arrivals, and mostly so after 2002 (when Euro coins and notes were introduced) in contrast to 1999 (when the exchange rates were fixed). In addition, there is evidence of tourism diversion: The stated increases occurred to the detriment of non-EMU countries. In other words, tourists substituted away from countries that are not carrying the Euro.

PS: Things seem to be looking a bit better for Greece right now. But if it were still to be dropped from the Euro-zone, consider a substantial negative impact on its vital tourism industry.

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