The Effects of 2008 Financial Crisis on Iran's Bilateral Trade in International Tourism Services

Financial crisis is one of the most effective economic problems that may occurring an economic region and eventually spread to other regions through which economic indicators can be affected seriously. According to the literature, however, financial crisis has had less impact on trading services than feasible goods. The current study explores the effects of recent global financial crisis on Iran’s trade in services during the period 2003-2010, given that tourism has a dominant role in the country’s relations with the major trading partners including Canada, Italy, Germany, Russia, Japan, Great Britain and France. Using bilateral cross-section export data, a specified gravity model has been estimated by Stata(11) to show indeed the crisis effect on such trade relations. The Empirical results obtained indicate that 2008 financial crisis has affected significantly bilateral tourist flows between Iran and its major country partners while the effect has been less than that of total trade in services. Other variables such as income per capital, exchange rate and distance have had significant but different effects on Iran’s international tourist earnings.