Effect of Tourism Revenues on Current Account Balance: The Case of Turkey

Owing to its direct and indirect effects on national economies, tourism is accepted as an important sector in the world. By providing foreign currency input to countries plays an important role in maintaining the current account balance in the balance of payments. Tourism is a labor-intensive sector as it is a service sector. Therefore, it is expected to be effective in decreasing unemployment by increasing employment. The development of the sector not only increases employment but also increases production and consumption in the economy. As it has international cultural and social effects, it contributes to the promotion of countries to the outside world by providing communication between countries. The tourism sector, whose development is continuously progressing, is becoming an increasingly important sector by many countries due to the economic contributions it provides to countries. As previously seen simply as a sector of economic activity, the development in Turkey began after the 1940s. The development of the tourism sector plays significant role in the realization of economic growth in Turkey too, like other many developing countries. In Turkey, which has important tourist areas as geography in particular experienced very significant development in tourism after the 1980s, development and protection of the sector has started to be ensured by various regulations. The contribution of the tourism sector, which was developed with the protection measures, the regulations issued for the promotion of tourism, the exceptions and privileges granted to the economy during economic recession periods, was also clearly seen. In this context, the relationship between tourism income and the current account balance t is important to propose policies for the development of the sector.In this study, the effect of tourism revenues on current account balance in Turkey during the period 2003-2018 was analyzed. For this purpose, before examining the causality relationship between tourism income and current account balance, Augmented Dickey Fuller and Phillips Perron unit root tests were applied to the series of variables used. 2003:1-2018:4 quarterly data is evaluated. The causality relationship between tourism income and current account balance was constructed by performing VAR Granger Causality test. According to the results, a two-way causality relationship was found between the variables. This result is supported by the findings obtained from Impulse-Response Analysis and Variance Decomposition Analysis conducted with the Var model.