Exchange rate pass-through to restaurant and hotel prices in the United States: The role of energy prices and tourism development

USMAN O., Iorember P. T., Jelilov G.

Journal of Public Affairs, cilt.21, sa.2, 2021 (ESCI) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 21 Sayı: 2
  • Basım Tarihi: 2021
  • Doi Numarası: 10.1002/pa.2214
  • Dergi Adı: Journal of Public Affairs
  • Derginin Tarandığı İndeksler: Emerging Sources Citation Index (ESCI), Scopus, Academic Search Premier, IBZ Online, International Bibliography of Social Sciences, ABI/INFORM, Business Source Elite, Business Source Premier, Communication & Mass Media Index, PAIS International, Political Science Complete, Public Affairs Index, vLex
  • İstanbul Ticaret Üniversitesi Adresli: Evet

Özet

This study incorporates energy prices and tourism development into the standard purchasing power parity doctrine to investigate exchange rate pass-through to restaurant and hotel prices in the United States over the period 2001:Q4 to 2017:Q4. We apply the multiple structural breaks cointegration test and flexible autoregressive distributed lag (ARDL) method. Our empirical results provide evidence that exchange rate appreciation reduces restaurant and hotel prices while an increase in energy prices and tourism development causes the prices of restaurant and hotel to rise. However, the pass-through of exchange rate, energy prices, and tourism development is incomplete in both the long- and short-run with the long-run pass-through having a stronger effect. Furthermore, the causality results show that restaurant and hotel prices have predictive power for exchange rate. Causality between restaurant and hotel prices and tourism development has a feedback effect. We also find that exchange rate Granger causes not only energy prices but tourism development while tourism development causes energy prices. The policy implications for these results are carefully outlined in the study.