THE MACROECONOMIC EFFECTS OF TOURISM RECEIPT FLUCTUATIONS IN TAIWAN

The tourism sector in Taiwan has faced a large decline in foreign exchange receipts starting from the second half of 2016. This paper constructs a small open, two-sector dynamic stochastic general equilibrium (DSGE) model to study the macroeconomic effects of tourism receipt fluctuations. It finds t...

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Bibliographic Details
Published in:Academia economic papers 2019-06, Vol.47 (2), p.163-207
Main Authors: Chang, Juin-Jen, Lin, Hsieh-Yu, Su, Chih-Hsien, Yang, Shu-Chun S
Format: Article
Language:Chinese
Subjects:
Economic impact
Economic theory
Economics
Macroeconomics
Subsidies
Tourism
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Summary:The tourism sector in Taiwan has faced a large decline in foreign exchange receipts starting from the second half of 2016. This paper constructs a small open, two-sector dynamic stochastic general equilibrium (DSGE) model to study the macroeconomic effects of tourism receipt fluctuations. It finds that the decline of tourism receipts has a negative effect on total output. In particular, the tourism sector experiences severe declines in output, labor, and investment. When the elasticity of substitution between labor of tourism and other sectors is high, the negative macroeconomic effects can be mitigated. We also investigate the effect of the tourist subsidy policy. Although the subsidy helps reduce the output decline in the tourism sector, the debt-financed subsidy deteriorates the fiscal position; the required fiscal adjustment - cutting government spending or raising taxes - in turn has negative effects on the overall economy.
ISSN:1018-161X
1810-4851