The link between money supply and tourism demand cycles: A case study of two Caribbean destinations

Jorge Ridderstaat
Robertico Croes, University of Central Florida


This study investigates whether money supply cycles in Canada, United Kingdom, and United States affect tourism demand cycles for Aruba and Barbados. Money supply data are, generally, more easily available than business cycle data (gross domestic product) and have the potential to influence tourism demand cycles. The study contributes to the literature by presenting an economically detailed and sophisticated approach for further understanding the dynamics of tourism demand, using money supply cycles as the explanatory factor. In addition, the study advances the theory through new propositions. The methodology involves data decomposition together with unit root, cointegration, and causality testing. The results show that money supply cycles can impact the cyclical movements of tourism demand and that the impacts are asymmetric, depending on the stage of development of the cycles. These findings implicate the need for adequate policies to counter expected tourism performances below their trend.