In a seminal paper, Frankel and Rose (2002) estimate the effect of currency unions on GDP via trade. That analysis was carried out under the assumption that the unique effect that currency unions have on growth is via promoting international trade flows. However, the effect of sharing a common currency on tourism has been neglected. After dividing the sample into three groups according to the level of income, in the first stage of our study a considerable effect of common currency on tourism is obtained. For that reason, a single currency not only promote trade but also tourism.
In fact, for the high income economies, the effect of common currency on tourism is greater than on trade.