3. • The international travel account in Brazil has accumulated
huge negative balances since 2005. Followed by expenses
associated with equipment and transportation rentals, this
item is what has been pushing up the deficit in the services
account to the greatest extent.
• The devaluation of the exchange rate, observed since May
2012, along with the verification of a negative balance in the
international travel account brought up the following
question: why did the net balance remain negative?
• This analysis attempts to answer this question, analyzing the
main variables that explain this account, and calculating the
elasticities observed in the estimates.
Introduction (motivation)
4. • Considering the relevance of the subject matter at hand,
there are few articles that have proposed to quantitatively
measure the key determining factors of the balance of the
international travel account in the balance of payments.
Qualitatively, the relationship between its exchange rate,
income, and expenses associated with services (specifically
with international travel) already is a well-known
component of economic literature. Empiric evidence in this
respect, however, is scarce, particularly upon considering
analyses of Brazil’s economy.
Literature
5. • Meurer and Duarte (2002).
• Cruz and Curado (2005).
• Rabahy, Silva and Vassallo (2007, 2008).
Literature about Brazil
7. • The variables employed to estimate the equation of travel were
the net value (revenues minus expenses) of international travel,
as the dependent variable. The explanatory variables utilized
were the following: the difference between GDP in Brazil and
in the United States with a lagging period (as proxy for
worldwide income); a real effective exchange rate (REER)
deflated by consumer prices (CPI); and a tendency.
• All series made up the equation in logarithmic format. The
available data ranges from 1988 to 2011, quarterly data.
Methodological Aspects
8. • Due to the presence of unitary roots in all series and the
existence of cointegration between some of them, four
estimations were made: the first using Ordinary Least Squares
(OLS). The other three estimations were performed utilizing
cointegrant regressions through the following methods:
Dynamic Ordinary Least Squares (DOLS), Fully Modified
Ordinary Least Squares (FM-OLS), and Canonic Cointegrating
Regression (CCR).
Methodological Aspects
10. Final Remarks
• The elasticity found through the estimations illustrate that the
balance in the international travel account is more susceptible to
variation in the country’s income than to variations in the real
exchange rate. In cointegrated models, the coefficient of the
income variable points to an elasticity three to four times greater
than the elasticity found for the exchange rate variable. This
result is in line with the previously analyzed empirical literature,
as is highlighted by Sinclair (1998); Rabahy, Silva, and Vassallo
(2007); Brakke (2005); and others.
11. Final Remarks – Coments
• Sharp rise in consumers’ credit.
• The opening up of the economy and the deregulation of the
purchase of dollars in Brazil.
• Decrease in airfare costs, particularly after 2009, which is when
Brazil’s National Civil Aviation Agency (ANAC) approved the
gradual release of international airfare tariffs.
12. Thank you so much!
Simone Maciel Cuiabano
E-mail: scuiabana@gmail.com
