More on the International Travel “Trump Slump”

Has spending on international travel to and tourism in the US dropped more than expected based on world GDP and the value of the dollar? Yes.

Here are seasonally adjusted travel and tourism (export) expenditures, in millions of 2017$ (CPI deflated), plotted against real world GDP (Figure 1) and the real value of the US dollar (Figure 2).

Figure 1: Total Travel and Tourism-Related Exports deflated by CPI into 2017$, in millions (blue, left log scale), and real world GDP at market exchange rates, cubic interpolation from annual (red, right log scale). Source: Bureau of Economic Analysis and the National Travel and Tourism Office (NTTO) Bureau of Transportation Statistics, IMF, World Economic Outlook database, October 2018, author’s calculations.

Figure 2: Total Travel and Tourism-Related Exports deflated by CPI into 2017$, in millions (blue, left log scale), and real value of US dollar against broad basket (red, right log scale). Source: Bureau of Economic Analysis and the National Travel and Tourism Office (NTTO) Bureau of Transportation Statistics, Federal Reserve Board, author’s calculations.

In this post, I merely pointed out that arrivals seemed to be quite low given the strength of the world economy. Here I attempt a more formal analysis. In this case, since it is difficult to reject consistently the no-cointegration null using the Johansen procedure, I estimate an ARDL, letting EViews choose the optimal specification.

I then use this specification to forecast dynamically over the 2016M11-2018M07 period. The resulting forecast is shown in Figure 3.

Figure 3: Total Travel and Tourism-Related Exports deflated by CPI into 2017$, in millions (blue, log scale), and dynamic forecast (red) and 67% confidence interval. Source: Bureau of Economic Analysis and the National Travel and Tourism Office (NTTO) Bureau of Transportation Statistics, Federal Reserve Board, author’s calculations.

Notice that by 2018M07, the forecast was significantly above the actual, suggesting that some factor (aside from the dollar) is depressing international travel/tourism spending.

60 thoughts on “More on the International Travel “Trump Slump”

  1. Moses Herzog

    Mixed feelings on this post. Not really struck hard by this one. I’m willing to genuinely concede that I may be missing something here, not catching the whole thing. Certainly wouldn’t be the first time I missed the gist of something.

    Here’s some interesting politically related stuff. I think this shows how many ignorant white people we have in this nation. Not much “formal education” etc. I tend to think of the “deep south” region of America as being much more uneducated than the Midwest USA region, but then when I watch stuff like this, I tend to have “second thoughts” about how well educated Midwesterners are (I tend to consider myself a midwesterner, as I was born there and I have never picked up the southern accent). However, being truthful, I have spent the vast majority of my life in the South. View myself as a “transplant” in that sense.

  2. pgl

    “Notice that by 2018M07, the forecast was significantly above the actual, suggesting that some factor (aside from the dollar) is depressing international travel/tourism spending.”

    Your statistical model did indicate that the stronger dollar is at least part of the story. I guess one could argue that the estimated effect understates the true effect from the stronger dollar.

  3. PeakTrader

    The mainstream media with over 90% negative reporting on Trump, since he took office, gives an extremely biased and false impression to foreigners, and likely a much bigger influence than Trump himself.

    1. baffling

      no peak, trumps mouth tends to speak for itself. the rest of the world simply has to listen to what he says to draw their own conclusions. sarah sanders manipulations of trump have much less impact in the rest of the world-they typically do not listen to her soundbites.

      1. PeakTrader

        Baffling, the rest of the world gets fake news and false narratives from our extremely biased mainstream media.

        When liberal/socialists in this country believe it, what do foreigners believe, particularly in crappy socialist and authoritarian countries in Europe and the Middle East?

        You extremists do a lot of damage.

        1. baffling

          “Baffling, the rest of the world gets fake news and false narratives from our extremely biased mainstream media.”
          just curious, are you even aware of when you lie corev? the rest of the world gets quotes directly from trumps mouth, and determines their veracity directly. your mainstream media bogey man is rather tiring. come up with a legitimate argument.

      2. PeakTrader

        I was talking to someone from Germany yesterday. He said the U.S. is much better than Germany. Apparently, heating costs are higher in Germany, although houses are much smaller. Also, few people can afford a car. Income is lower, and prices and taxes are higher, than the U.S..

        1. 2slugbaits

          I was talking to someone from Norway yesterday. He said Norway is much better than the US. Apparently, cooling costs are higher in the US, although houses are much uglier. Also, few people can afford fast rail service. Income is lower and crime is higher than Norway.

          1. PeakTrader

            2slugbaits, Norway has a lot of oil and a small population.

            In Sweden, 94% of crime goes unsolved.

            I guess, you like gingerbread houses.

            A lot of Norway’s money goes to public goods instead of private goods.

            Colorado has a fairly new light rail system and international airport, if you want to compare similar populations.

          2. Ulenspiegel

            PeakTrader wrote: “In Sweden, 94% of crime goes unsolved.”

            You have a solid source for this number or did you pull it out of your lower back?
            Hint: It does not pass simple relevant smelltests.

          3. Ulenspiegel

            PeakTrader wrote: “In Sweden, 94% of crime goes unsolved.”

            You pool all crimes and draw a conclusion. Interesting methodology. 🙂

            I admit, it is unplaseant to get laughed at the Swedish police staion for requesting that they pursue the theft of my bicycle, but…

            the USA has a homocide rate of 5.5 per 100.000, Sweden of around 1.3.

            60% of the US homocides get solved, only 20% in Sweden (the number is indeed a shame).

            Which country has more unresolved murder cases per 100.000 citizens?

            USA 5.5 * (1-0.6) = 2.2 ; Sweden 1.3 * (1-0.2) = 1.04

            Is it really true that US police only gets 50% of the Swedish performance? 🙂

          4. PeakTrader

            Ulenspiegel, I’ve gone through the comparisons before.

            For example, 13% of the U.S. population is black and commit 50% of the murders. We also have lots of minority gangs from Latin America, which generally have much higher murder rates than the U.S..

            In Germany, for example, 1% of the population is black. You need to show an apples to apples comparison rather than nonsense.

          5. baffling

            peak, why must you compare black populations in the usa to black populations in sweden? does being black make one inherently more violent? you are the one who appears to be spouting nonsense here.

          6. baffling

            peak, most of the black population does not live in south chicago. you obviously want to conduct an analysis tainted with racism, and then complain when somebody calls you out on it. peak, you are simply an old man still wishing for the days you could call the young black man “boy” as you send him back to his part of town. pathetic.

        2. noneconomist

          You talked to “someone from Germany” and…really? Very few have cars? Must be selling them elsewhere, although who wants a BMW, a Mercedes, a VW, a Porsche…..?
          I talked to a former in-law about her winter in North Dakota. She too spent a lot on heating.
          Poor Deutschland. They’’ve been running a favorable trade balance since 1952 according to tradingeconomics, which is a revered goal of glorious leader. You know: make more and ship more to other countries, import less. Trade deficits bad. You knew, right?

          1. PeakTrader

            According to nonecinimist the British make Rolls Royces and U.K. Per Capita income is also less than $10,000 a year compared to the U.S.. So?

          2. Ulenspiegel

            Peak Trader wrote: “All Americans have the best healthcare.”

            Why does the life expectancy of US citizens stagnate?

            Hint: You pay a lot and get a bad result because you pay for the wrong stuff. Prevention like being less fat prevents more cancer deaths than your sophisticated treatments. More careful prescription of critical stuff prevents hundred of thousand drug addicts and 30.000 ODs per year…

            In your shallow hurra patriotism you are obviously unable to get reelvant numbers and thing beyond the tip of your nose.

          3. PeakTrader

            Adjusted for equal comparisons, the U.S. has a very high life expectancy rate.

            I’ve explained many of the factors before, like differences in counting infant mortality.

        3. Ulenspiegel

          “Also, few people can afford a car. Income is lower, and prices and taxes are higher, than the U.S..”

          1) You do not need/want a car if you live in a city with a decent public transport system, it is not about money, it’s about time. 🙂

          2) Incomes are lower. However, we poor Germans have a first world health insurance system and student debt is unknown, aspects US guest scientists or PhD students find puzzling. 🙂

          1. PeakTrader

            And, Americans like the convenience, flexibility, independence, and freedom of automobiles.

            Moreover, the U.S. is a big country.

          2. Ulenspiegel

            “The U.S. is ranked #1 by the WHO in healthcare labor and capital, and it’s most technically advanced. No one is turned away in the U.S.. German healthcare:”

            This does not change the fact that many people in USA are without health care and the quality of the US healthcare for students is inferior.
            Because you pay a lot does not mean you actually get a good result.

            “And, Americans like the convenience, flexibility, independence, and freedom of automobiles.”

            And many Germans do not like the inconvenience of cars in cities with good transport system. You are moving the goalpost. You lack alternatives, you have to use cars where others do not have. You do not have the choices.

          3. PeakTrader

            All Americans have the best healthcare.

            Not all have healthcare insurance.

            I guess, you like running to the bus stop when you’re late.

          4. baffling

            “All Americans have the best healthcare.”
            peak, lets me point out something to you in your fantasy land. not all americans have access to the best healthcare. you are factually incorrect, as usual, with your statement. seriously, do facts and truth not exist in your fantasy world? you just make things up to suit your argument? its almost like talking to corev…

        4. pgl

          You must talk to the dumbest German ever. Germans cannot afford cars in the nation that gave us Volkswagen?

        5. pgl

          Real income per capita from the World Bank:

          Yea the US ranks above a lot of nations but several nations have higher levels than we do. So what if Germany is a bit less than the US? Of course its leader is a woman so I get why you want to this nation is a hell hole.

          Your excuse for Norway being much that the US is that they produce oil??? Seriously – so does the US. Yea Germany ends up importing oil. Or did you not know this?

          And so it goes with off point and cherry picked intellectual garbage ala PeakDishonesty.

    2. pgl

      Lord – do you have to repeat the tired old dishonest stick from KellyAnneConway verbatim? I guess in your orbit – telling the truth = negative reporting.

  4. PeakTrader

    And, of course, the mainstream media and many screwed up countries, e.g. in Europe and the Middle East, loved Obama.

    1. Moses Herzog

      @ PeakIgnorance
      Unlike Saudi Arabia, Russia, and North Korea loves Trump you mean?? Wow man, did your Dad regularly knock you up-side the head growing up?? There has to be SERIOUS damage there somewhere along the way.

      1. ilsm


        Between the straight out of the ‘Arabian Nights’ Kingdom of Saudi Arabia (KSA), Russia and PDRK only the al Qaeda in the Levant and Iraq funding, genociding in Yemen and sponsoring jihad on the west and Shi’a KSA (with a ‘real’ prince for minister of effete mayhem) wags the “kill them with drone and stealth welfare programs to make them free” US dog.

    2. noneconomist

      Screwed up countries in Europe, s—-thole countries elsewhere. But shouldn’t we have Norwegians visiting here in droves looking to settle in the golden land?

      1. PeakTrader

        Noneconomist, you shouldn’t use Dick Durbin’s word to describe countries, even if they are what you say.

        1. noneconomist

          Where are the boat and plane loads of Norwegians (and other Scandinavians) coming to our shores yearning to be free?

      2. PeakTrader

        And, noneconomist, you shouldn’t accept Republicans are sub-human and you can do anything you want to them.

    3. noneconomist

      I talked to somebody from South Carolina who who wishes her summer electricity bills–it’s very hot there–were less. See, she works for one of those big (screwed up?) German companies located in a state where foreign companies employ over 100,000 people. Companies like BMW, Bosch, Daimler, Continental Tire, adidas, BASF, BEHR,
      Those Germans. Must be part of the reason they’ve had favorable trade balances for 66 years.
      In fact, the state of South Carolina says “Attracting foreign investment is essential in today’s global economy and the state of South Carolina has a long history of welcoming and growing manufacturing and research and development operations of multinational corporation.”
      If that German PT spoke to only knew he could come to South Carolina to escape his miserable life in the homeland., I bet he’d be there in a heartbeat. If he’s lucky, he might even end up on a (German car) assembly line living the high life in Mississippi or Alabama, where state governments have plowed millions into attracting investments from Germany and those other screwed up European countries.

  5. 2slugbaits

    So this exercise answers the question whether or not tourist spending is less than would have been expected. The other question that came up in the previous post was whether or not the rise in the real exchange rate is responsible for the fall in tourist spending. The answer to that question is “probably not.” The effect of the contemporaneous real exchange rate is both small in magnitude (although with the expected sign) and statistically insignificant at the usual p-values. The two oddities in the model output are the contemporaneous and lag-2 coefficients for world GDP. It’s possible that this result is due to EViews selecting 2 lags based on the AIC model selection. The AIC is generally less parsimonious than the Schwarz criterion and sometimes this leads to unexpected signs in the coefficients.

  6. AS

    Professor Chinn,
    After viewing the automatic ARDL selection resulting from minimizing the AIC criterion, would you eliminate the two variables: Log(REALDOLLAR BROAD) and Dummy IRAQINV? Or, would we need to see if the SSR was lower using the original ARDL model compared to a revised model that eliminated these two variables?

    1. 2slugbaits

      AS FWIW, in most cases you would expect the SSR to go up if you eliminated those two variables. As a general rule you can always improve the fit by adding parameters, but the risk is that you end up overfitting to a sample and you get poor out-of-sample performance. The various information criteria are supposed to balance the improved fit of adding a variable against the penalty of having too many variables. The AIC tends to put more emphasis on a better fit and less of a penalty on added parameters than the Hannan-Quinn or Bayesian-Schwarz information criteria. The latter two both put a higher premium on parsimony.

      1. AS

        Thanks for the comments. I knew that R squared increases as more explanatory variables are added, but thought that I read and computed in the past that the SSR may or may not decrease if non significant variables are removed. Also of interest, I used a dummy variable for the IRAQ invasion from March 2003 to May 2003 (after looking for dates on Google). As a result, the dummy for the IRAQ invasion is significant. My ARDL model is 2,0,1, so may have made an error trying to duplicate Professor Chinn’s model. Also, my constant “C”, is not significant. My Log Likelihood at 423.6412 is close as is the SSR at 0.089269.

        1. Menzie Chinn Post author

          AS: My Iraq dummy is 6 months Mar 2003-Sep 2003, and my January 2011 dummy is just for that month. If I had more time, I might try estimating a cointegrating relationship, as ARDLs are kind of black box.

          1. AS

            Thanks for the model, very interesting. Just for fun, I computed my attempt at your model from 2002m1 to 2015m6, after which it looks like tourist17$ started to drop. My dynamic forecast from 2015m7 to 2018m7 forecasts a drop from 2015m7 to 2016m2 and then forecasts an uptick from 2016m3 to 2018m7. The actual tourist17$ goes beneath the lower 1SD curve starting about 2017m12. I wonder if your model shows similar results.

        2. Moses Herzog

          Sounds like you got the number at least relatively close. At least you made the effort and made “the old college try”. That’s better than most here can say, sadly including myself. The mathematical journey can teach you a lot sometimes, even if you don’t quite make it to destination Solution Utopia City. Not that I would know where Solution Utopia City is. My mathematical compass got broke somewhere. My hat’s off to you Sir.

    2. AS

      I see the Excel file at the Department of Commerce Bureau of Travel Statistics(at first I thought it included only one year). However, I am having trouble with the World GDP graph scale. I am assuming that the comment about “GDP at world exchange rates” refers to the “purchase power parity” version of the IMF world GDP. I assume that you are dividing the World GDP by a factor prior to graphing, but can’t seem to hit the exact factor.

  7. baffling

    there appears to have been a nearly 10% drop in the value of the dollar during the trump administration. i would assume that should have resulted in increased tourism with a weaker dollar-but that does not seem to occur.

  8. Bruce Hall

    Here’s some speculation by The Washington Post: Note that this is almost a year and a half old.

    But what caught my eye is that the flatlining of travel expenditures started in early 2015 or two years before Trump took office. Based on that observation, I would be hesitant to place too much weight on anything Trump did… or the forecast of increasing travel expenditures for 2018. A bigger question is what happened during Obama’s last two years in office to cause the flatline/downturn? Perhaps figure 2 is a better explanation than a dummied regression analysis.

    1. pgl

      Oh yes – all problems in 2018 were created by Obama! Actually as a resident of NYC, the less tourists the better!

      1. Bruce Hall

        pgl, get off your high horse and examine the graphic and re-read my question: A bigger question is what happened during Obama’s last two years in office to cause the flatline/downturn?

        Or are you saying that something did not fundamentally change in 2015? Perhaps I need new glasses, but my eyes tell me that the downturn/flatline trend occurred in 2015 and the present numbers are a continuation of that.

        1. pgl

          Chill out Bruce! I already noted what happened in 2014. The dollar appreciated. Which of course is all Obama’s fault.

          1. Bruce Hall

            pgl, and yet somehow the continuation of that phenomenon is a Trump issue, but not an Obama issue? Let’s be reasonable. Sometimes, currencies fluctuate. Sometimes it is America’s favor and sometimes it isn’t. Saying that a decline in foreigners traveling to the U.S. in 2015-16 was not Obama’s fault, but rather because of a strong dollar… and then saying that the flatline trend of foreigners traveling to the U.S. in 2017-18 was Trump’s fault rather than because of a continued strong dollar places you in the ranks of a political hack rather than an economist (or student of economics).

            So, what is it, the strong dollar or two lousy presidents scaring away travelers?

  9. Ben Arownd

    Business travel has actually declined in nominal terms the last few years. It’s possible that video technology is substituting for cross-border face-to-face meetings.

    Note on Source: Bureau of Transportation Statistics is part of DOT not DOC.

    1. Menzie Chinn Post author

      Ben Arownd: Thanks – Good point, I misidentified source (although link is correct). It’s Source: Bureau of Economic Analysis and the National Travel and Tourism Office (NTTO). Will fix.

  10. KD

    As an interested reader who lives outside the US – ie, Australia – and speaking as someone who travels a lot, I think the stronger USD has played a big role (the AUD is down about 30% against the USD over recent years), but I wonder whether weak growth in household incomes is also important, as household incomes have generally grown more slowly in real terms than GDP over recent years across the advanced economies.
    PS thanks for such a great economics blog

    1. pgl

      We pay more but our airline service sucks relative to what one gets in Europe. Yes – we need to end our airline oligopoly.

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