Effects of foreign demand increase in the tourism industry: a CGE approach to Turkey

Abstract

The “Incentives Program for the Tourism Industry in Turkey” foresees a high growth rate in inbound tourism revenues over the next 10 years. This paper aims to analyse the economic effects of a 10% increase in foreign demand for the tourism industry in Turkey by using a computable general equilibrium model based on a social accounting matrix year of 2002. The tourism industry is specified by using tourism satellite accounts and set as a separate sector in input–output table. Simulation results suggest that increase in foreign tourism demand causes an increase in the GDP and employment, households' income, real private consumption and investment expenditures in the economy and puts pressure on domestic prices at different levels as expected.