Evaluating the effect of the introduction of the euro on tourist flows: a synthetic control approach

The purpose of this paper is to investigate the effect of the introduction of the euro on bilateral outflows of tourism among European Monetary Union (EMU) countries in the period 2002-13. Descriptive statistics indicate heterogeneous paths in tourism flows, arising from several potential drivers. In order to analyse this observed heterogeneity, we use the synthetic control method, which does not require a large set of independent variables and allows for the development of separate analyses for each country. Results indicate that the introduction of the euro favoured tourism flows within EMU countries compared to flows between EMU and non-EMU countries in three (Belgium, Italy, and Spain) out of the 10 considered countries. These findings underline the presence of significant heterogeneity and emphasise the importance of non-parametric methods in understanding the effect of EMU.