The effect of exchange rate (regime) on Botswana’s inbound leisure tourism demand

This paper investigated the effect of the exchange rate (regime) on inbound leisure tourism, using annual data from four primary tourist markets for Botswana, namely the USA, the UK, Germany, and South Africa, from 1997 to 2018. A PMG/ARDL panel framework was used to interrogate the short- and long-run effect of the bilateral exchange rate and the crawling pegs regime. The findings revealed that exchange rate devaluation (depreciation) moderately positively affected Botswana’s inbound leisure tourism demand under adjustable and crawling pegs regimes in the long- and short-run periods. Further, the results suggest that switching to a crawling pegs exchange rate regime positively affects inbound leisure tourism demand in the long-run. However, the benefit of currency devaluation diminishes when moving towards a flexible regime. In the short-run, the South African and US markets are more sensitive to bilateral exchange rates than other markets, especially under the crawling pegs exchange rate regime. Furthermore, the causality results show that the exchange rate (regime) has predictive power for inbound leisure tourism demand. The policy implications for these results are carefully outlined in the study.