Comprehensive Sectoral Analysis of Medical Tourism’s Economic Impact on Turkey’s Growth Using Frequency Domain Causality from 2010 to 2023

Over the past decade, medical tourism has rapidly gained prominence as a vital segment of the global healthcare and travel sectors. Countries worldwide have recognized the economic potential of attracting international patients seeking medical treatments combined with travel experiences. Turkey, benefiting from its geographical advantage, well-developed healthcare infrastructure, and competitive service pricing, has emerged as one of the foremost destinations for medical tourism. This article explores how the medical tourism sector has influenced Turkey’s economy from early 2010 through the end of 2023, focusing on the complex relationships between healthcare tourism revenues, industrial output, currency valuation, and overall economic growth.

Context and Objectives

Turkey’s national Health Transformation Program explicitly identifies medical tourism as a strategic growth pillar, emphasizing its role in diversifying economic income streams and supporting sustainable development goals. The core objective of this analysis is to assess how revenues generated from medical tourism correspond with Turkey’s broader economic indicators. More specifically, it seeks to understand whether medical tourism acts merely as a beneficiary of general economic growth or if it can independently fuel economic expansion. This involves studying the interdependencies among three primary variables: industrial production, real effective exchange rate, and medical tourism revenues.

Analytical Framework: Frequency Domain Causality

To investigate these relationships thoroughly, the study employs a frequency domain causality approach, an advanced statistical technique designed to examine cause-and-effect dynamics across different time horizons—short, medium, and long term. Unlike traditional methods, this approach can reveal subtle, time-dependent causal links that may otherwise remain hidden.

The three main indicators analyzed are:

Industrial Production Index (IPI): A key measure reflecting the country’s economic activity and growth by capturing production output across industries.
Medical Tourism Revenues: The income from health services consumed by foreign patients, indicative of the sector’s size and growth.
Real Effective Exchange Rate (REER): A composite index that adjusts currency values for inflation differences and trading partner weights, reflecting Turkey’s international cost competitiveness, particularly in healthcare services.

The data for this study are sourced from official government agencies and national statistical institutions to ensure reliability and accuracy.

Findings: Unpacking the Relationships

The study uncovers a series of insightful and sometimes unexpected connections among the variables:

Economic Growth Drives Medical Tourism Expansion
There is clear and consistent evidence that economic growth, as measured by industrial production, positively influences medical tourism revenues across all time frames. When Turkey’s industrial sector grows, it reflects improvements in infrastructure, technology, and overall economic health—factors that enhance the country’s capability to offer advanced medical services. This growth creates a fertile environment for the medical tourism industry to flourish, indicating that broader economic progress sets the stage for expanding health tourism.
Medical Tourism Does Not Directly Propel Economic Growth
Contrary to what one might expect, the analysis finds no significant causal effect running from medical tourism revenues back to economic growth. In other words, while the sector benefits from the economy’s strength, it does not, by itself, drive overall economic expansion. This suggests medical tourism, though a valuable industry, remains somewhat dependent on the underlying economic momentum rather than serving as a primary engine of national growth.
Currency Movements Affect Economic Performance
The real effective exchange rate impacts Turkey’s economic growth in the short and medium terms. Fluctuations in currency value influence the competitiveness of Turkish exports, including medical services, by making them more or less affordable to foreign clients. However, economic growth does not appear to influence exchange rates, highlighting that currency valuation acts as an external economic driver rather than a reactionary factor.
Dynamic Interaction Between Exchange Rate and Medical Tourism Revenues
The relationship between currency valuation and medical tourism revenues is notably reciprocal but varies with time. In the short term, changes in medical tourism revenues influence the real effective exchange rate, potentially through foreign currency inflows from international patients. Conversely, in the medium term, shifts in the exchange rate affect the volume and revenue of medical tourism. When the Turkish lira weakens, healthcare services become cheaper for foreign visitors, boosting medical tourism income. On the other hand, a stronger currency can reduce Turkey’s attractiveness as a medical tourism destination by increasing costs for international patients.

Policy Implications

These findings offer important lessons for Turkish policymakers and industry stakeholders. Since medical tourism does not independently drive economic growth, its development should be integrated into broader economic strategies that prioritize industrial expansion, infrastructure improvement, and macroeconomic stability. Investments aimed at boosting industrial output and general economic performance will indirectly benefit medical tourism by enhancing the overall environment in which the sector operates.

The critical role of the real effective exchange rate suggests that managing currency stability and competitiveness is essential to sustaining Turkey’s attractiveness in the global medical tourism market. Policymakers should carefully consider exchange rate policies alongside efforts to upgrade healthcare quality and capacity. Coordinated macroeconomic and sector-specific measures will be crucial to maximizing the benefits from medical tourism.

Furthermore, this analysis highlights the importance of fostering innovation, improving service quality, and expanding healthcare infrastructure to fully leverage economic growth opportunities. Aligning health tourism development with national economic growth policies ensures that the sector can continue to grow sustainably and contribute meaningfully to Turkey’s economy.

Contribution to Research

By utilizing a frequency domain causality framework over a substantial period, this study fills a notable gap in existing literature, which often relies on static or short-term analyses. It captures the evolving, time-sensitive interactions between medical tourism and macroeconomic variables, providing a richer understanding of the sector’s economic role. This nuanced approach sheds light on how immediate shocks and longer-term trends influence medical tourism’s impact on the economy.

Conclusion

Medical tourism in Turkey is deeply intertwined with the country’s wider economic context, especially industrial production levels and currency fluctuations. While it benefits from economic growth, it does not independently trigger broader macroeconomic expansion. Exchange rate movements play a pivotal role in shaping the sector’s performance by affecting the affordability and international competitiveness of healthcare services.

This comprehensive examination underscores the necessity of viewing medical tourism through a macroeconomic lens, encouraging policymakers to integrate health tourism within holistic economic strategies. Doing so will help Turkey maintain and enhance its standing as a top global destination for medical tourists, securing long-term economic and social benefits for the country.

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