THE BULGARIAN FOREIGN TOURIST MARKET: PARTIAL EQUILIBRIUM ANALYSIS WITH REER
THE BULGARIAN FOREIGN TOURIST MARKET: PARTIAL EQUILIBRIUM ANALYSIS WITH REER

Summary/Abstract: The main objective of the paper “The Bulgarian Foreign Tourist Market: Partial Equilibrium Analysis With REER” is to evaluate an econometric equilibrium model for the Bulgarian foreign tourist industry. The main microeconomic assumptions of the model are the existence of identical consumers, identical composite tourist industry product and perfect market conditions. The REER is used as proxy for the composite product price and other proxies are introduced for foreign income and domestic tourist industry capacity. The data is deseasonalised on the basis of geometric mean approach and Hodrick-Prescott filter. The TSLS method of estimation is applied given the overindentified nature of the model. The estimation results are consistent with the core microeconomic theory. The estimated model allows for price equilibrium convergence. The dropping of the initial constraints allows for additional conclusions. The tourist industry can substantially gain from advertising, product diversification and lessened reliance on the summer income picks. The government, given the important macroeconomic role of the tourist industry under the CB regime and the potential tourist industry vulnerability, is strongly interested in implementing strategic measures guaranteeing sustainable tourist sector development.

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