engleski

The price tag of tourism: does tourism activity increase prices of goods and services?

We use panel data models on a data set covering EU new member states and candidate countries (Montenegro and Turkey) in order to investigate the relationship between tourism activity and the price level. Along with modelling the overall price level, we also separately model the price level of consumer goods, the price level of consumer services, and the price level of goods and services associated with tourism consumption (hotels and restaurants, recreation and culture, transportation, and food and beverages). Thereby, we control for other factors that commonly influence the price level of an economy, such as income, productivity, trade openness, and fiscal dominance. Our results suggest that tourism activity increases the overall price level in the economy. This effect is however much stronger for prices of consumer services, in particular for prices of recreation and culture, and hotel and restaurants.

price level ; tourism ; panel data models ; small open economies ; European Union.

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