THE IMPACT OF INTERNATIONAL TOURISM INCOME ON FOREIGN EXCHANGE RESERVES IN DEVELOPING COUNTRIES: AN EMPIRICAL ANALYSIS BASED ON PANEL DATA

Abstract

 International tourism is a key driver of economic progress, particularly for developing nations seeking to strengthen their foreign exchange reserves. This research investigates, through empirical analysis, how international tourism revenues influence China’s foreign exchange reserves over the period 2000 to 2025. Adopting a quantitative design and relying on secondary data provided by the World Bank, the study applies panel regression approaches, specifically Ordinary Least Squares (OLS) and Random Effects models, to explore the association between tourism receipts and reserve levels. The analysis also incorporates foreign direct investment, inflation, and current account balance as control variables. The findings indicate that tourism receipts exert a significant positive effect on reserve accumulation, with the Random Effects model producing a coefficient of 49.38 and an R-squared value of 0.9351, thereby demonstrating the strong contribution of tourism to reserve growth. The study concludes that tourism constitutes a strategic tool for economic development and recommends further investment in tourism infrastructure and promotional activities. The results also highlight policy implications for macroeconomic management. Nevertheless, the analysis is restricted by its single-country perspective and the issue of multicollinearity, which points to the importance of extending future research to include cross-country comparisons.