| Summary: | This study utilizes panel estimation models to analyse the determinants of tourism in 36 countries with observations of 108, and countries are further disaggregated into sub-groupings of high income, upper middle income, low middle income and low income countries. The application of panel econometric methods allowed us to control for unobserved heterogeneity amongst different countries and that is necessary to circumvent certain econometric challenges indicated in the literature which include endogeneity of tourism variables and also measurement biasness. Our results shows that tourism arrivals have the expected effect on tourism with a positive elasticity on tourism receipts ranging from
0.41% in all countries to 0.63% in low income countries. However, exchange rates and inflation have an expected negative sign, which implies tourism earnings are affected by high exchange rates and inflation which is attributed to costs of tourism related to tourism services such hotel prices, domestic transportation and entrances to tourism facilities like for example, game reserves. Furthermore, the results show different specifications per income groups. Therefore some variables tend to change its effect as situations are different from one country to another.
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