Analysing the impact of exchange rate shocks on health tourism with SVAR analysis

Abstract

Health tourism, which has become a significant global market, offers economic opportunities for destinations. In particular, the rise in foreign exchange rates directly influences health tourism, impacting both tourism demand and revenues. Therefore, understanding the effects of exchange rate fluctuations on health tourism is critical for the sector’s future success. This study aims to empirically examine the extent and direction to which health tourism is affected by shocks in exchange rates. The research utilizes quarterly time series data from Türkiye covering the period from 2012:Q1 to Q1 2024:Q1. The Augmented ARDL test applied in the study reveals a long-term cointegrated relationship between exchange rates and health tourism. Furthermore, the causality test by Breitung and Candelon (2006) indicates that exchange rates have a causality effect on health tourism. Conversely, health tourism also influences exchange rates across short, medium, and long-term periods. The SVAR test results show that an increase in the exchange rate leads to an increase in health tourism. Nevertheless, the empirical findings suggest that the impact of exchange rate shocks on health tourism is relatively modest.