Does tourism inflow help merchandise exports of Pacific Island economies? A gravity analysis

Abstract This paper empirically analyzes tourist inflows as a determinant of merchandise exports for the Pacific countries by employing a gravity model technique. Other relevant variables that augment the model are trade agreements, language affinity, and visa policies. The paper finds that inbound tourism to Pacific countries significantly increases merchandise exports: 1% increase in tourist inflows is associated with a 0.17% rise in merchandise exports in the region. This relationship is along expected lines, as international tourist arrivals can help reduce trade costs, increasing such exports. If international tourists come from countries that share a common language and have established economic partnerships through FTAs and relaxed visa policies, the increase in tourist arrivals is notably bigger.