Journal of Economic and Social Policy Volume 13 Issue 1 Inaugural Fully Electronic Version of JESP Article 7 12-7-2009 The Impact of Exchange Rate Variations and University Reputation on the Choice of Destinations of International Students in Australia and New Zealand Malcolm Abbott Swinburne University of Technology Ershad Ali AIS St Helens New Zealand Follow this and additional works at: http://epubs.scu.edu.au/jesp Recommended Citation Abbott, Malcolm and Ali, Ershad (2009) "The Impact of Exchange Rate Variations and University Reputation on the Choice of Destinations of International Students in Australia and New Zealand," Journal of Economic and Social Policy: Vol. 13 : Iss. 1, Article 7. Available at: http://epubs.scu.edu.au/jesp/vol13/iss1/7 epublications@scu is an electronic repository administered by Southern Cross University Library. Its goal is to capture and preserve the intellectual output of Southern Cross University authors and researchers, and to increase visibility and impact through open access to researchers around the world. For further information please contact epubs@scu.edu.au.
The Impact of Exchange Rate Variations and University Reputation on the Choice of Destinations of International Students in Australia and New Zealand Abstract The purpose of this paper is to determine the degree to which changes in exchange rates have an impact of the choices made by student when they travel abroad to undertake higher education. As well as changes in exchange rates other factors are also considered such as changes in the real income of students, and the reputation of universities. The findings were that exchange rate changes do have an influence on the demands of international students, although this is not uniform in nature across countries. This has important implications for policy makers as in a number of countries, such as Australia and New Zealand, government universities are often very reliant on the income generated by selling educations services to overseas students. This article is available in Journal of Economic and Social Policy: http://epubs.scu.edu.au/jesp/vol13/iss1/7
Abbott and Ali: The Impact of Exchange Rate Variations and University Reputation Introduction In recent years there has been a steady growth in the number of students seeking to study abroad at the higher education level. In 2006, for instance, it was estimated by the Organisation for Economic Cooperation and Development (OECD) that there were almost three million students studying in tertiary education institutions outside of their own country. 1 This figure is expected to rise to around five million by the year 2020 (OECD 2008). Traditionally the United States and the United Kingdom were the two most important destinations for students wishing to study abroad, but in recent years countries like Australia and New Zealand have also become important destinations (Larsen et al... 2002). 2 When deciding on a study destination students are influenced by a number of factors. These factors include such things as the reputation of universities, the cost of living in destination countries, the general impression of life in destination countries, the success of the marketing of universities abroad, the ease of entering and exiting the destination countries, the possibility of migrating to the destination country and the cost of tuition fees. Factors such as the cost of university tuition fees and living expenses are also influenced by fluctuations in exchange rates, particularly between the country of origin of the student and the country of destination (Abbott and Ali 2005; IDP Australia 2005). The growth of the numbers of overseas students studying abroad has important implications for both those countries that attract these students and for the institutions that enrol them. For the institutions these students provide important additional income to aid their expansion, but they also create additional demand instability as these students are affected by a greater range of factors than domestic students (i.e. student visa regulations, exchange rate fluctuations etc). At the national level overseas education has become an important export earner. Some countries and governments have increasingly had to consider and implement policy initiatives that help to accommodate these students. 3 For 1 Tertiary education refers to all post-secondary education and is made up of vocation education and training as well as higher education. 2 According to the OECD figures the United Kingdom and United States received well over half of all international students well into the 1990s. Countries like New Zealand and Australia were even net importers of education services in the 1960s and 1970s (Larsen et al... 2002). 3 Measures such as reform to student visa requirements and monitoring of quality standards of institutions have become common. Examples of these sorts of changes, such as the changes to immigration, work visa and student visa policies in Australia and New Zealand can be found in Abbott (2005). The two countries have altered and modified these over the years, often in Published by epublications@scu, 2009 1
Journal of Economic and Social Policy, Vol. 13, Iss. 1 [2009], Art. 7 instance, in 2008 the export of education generated 18 percent of services exports in the New Zealand case and 29 percent in the Australian case. Overall education exports were 4.1 percent of total New Zealand exports and 5.5 percent of total Australian exports. 4 Although there is an extensive literature on the impact of changes in exchange rates on the trade in commodities, the literature on the impact of exchange rates on the trade in educational services is far less extensive (Show-Lin et al. 1997; Chaoshin and Ken 2000; Chaoshin et.al. 2001; Clark et al. 2004; Harri et al. 2009). Some studies have found that changes in the cost of education will influence students to either withdrew, or temporarily withhold, their candidature from universities abroad (Christensen 2003 p. 1; Ali, Liqiong and Talukder 2006; Ali and Randhawa 2009 and Ali and Hseih 2009). As well some governments have sponsored surveys on the relative cost to international students of studying in their countries and others in order to determine in these differences are significant (see IDP 2005 for Australia and Asia, 2000, 2003 for New Zealand). As well as exchange rates institutional reputation is another factor that has an impact on students choosing their study destination. The demand of students for a university s qualification is directly related to the students career opportunities. The recognition of a university s qualifications by employers is, therefore, important to students. If the educational cost is not significantly different among the universities in a particular destination country, it is expected that students will be interested in studying at the better regarded universities in that country. The reputation of a university includes not only the recognition of its awarded degree, but also the availability and standard of educational facilities it offers and its physical location. The purpose of this study is to examine the impact that exchange rate fluctuations and the reputation of universities have had on the direction and scope of trade in education services at the higher education level. By using data on the number of students studying in universities in Australia and New Zealand and their country of origin, it will be possible to ascertain the degree to which they are influenced by changes in relative exchange rates. The background to the study, the methods used and analysis of regression models and results are discussed in the following sections. After that, analysis response to changes in the different countries. As well governments have implemented policies such as more streamlined visa application procedures and pastoral care policies. 4 In 2008 New Zealand total exports were $NZ 56,331m, services exports were $NZ 12,518 m and education exports $NZ 2,300m (Statistics New Zealand 2008). In 2008 Australian total exports were $A 225,693m, services exports were $A 54,386m and education exports $A 15,507m (Australian Bureau of Statistics 2008). http://epubs.scu.edu.au/jesp/vol13/iss1/7 1 2
Abbott and Ali: The Impact of Exchange Rate Variations and University Reputation of the major countries of origin has been presented separately, followed by the policy implications and concluding remarks in the last part of the paper. Background International trade in higher education services has become an important business over the past ten years. The greatest destination for international students is the United States, which represented 20 percent of the study abroad market in 2006. For those students not moving within the European Union the next most important destinations are the United Kingdom, Germany and Australia (see Table 1). 5 A range of other European countries are also important at receiving overseas students (from outside of the European Union) along with countries such as New Zealand, Malaysia, and Turkey. English speaking countries such as the United States, the United Kingdom, Canada, Australia, Ireland and New Zealand are particularly popular and constitute over 50 percent of the market (Table 1). The origins of the students are less concentrated, although Asian countries are particularly important. China, India and Korea are the three most important sources of international students, although it is noticeable that the top twenty countries of origin do not dominate the mix anywhere near as much as the top twenty countries do the countries of destination. As mentioned in the introduction, students are influenced by a range of factors, one of the most important being the relative affordability of fees and living expenses in the country in which they wish to study. Changes in exchange rates can be quite dramatic over a number of years and perhaps could influence the choices made by students when selecting the country to which they wish to travel. Looking at the case of a few countries, it can be seen that this may have occurred in practice. Figure 1 provides indexes of the value of the currencies of Indonesia, Korea and Thailand compared to the Australian currency during the 1990s. All three of these countries experienced substantial depreciations of their currencies against the Australian dollar during the Asian economic crisis of the late 1990s. Australia is an important destination for students from these three countries and it would be expected that the sharp changes in the exchange rates would have affected the choices made by students from these countries to study in Australia (Ali, Liqiong and Taluker 2006). 6 As it happens, student numbers from these three countries travelling to Australia to attend higher education did slacken off and fall during 1998 after the exchange rate crisis (see Figure 2). It would appear that exchange rate fluctuations, therefore, did have some impact on the choices 5 The United Kingdom and Germany receive large numbers of students both from other European Union countries and from outside the Union. 6 In 2006, for instance, there were 103,625 students from Korea, 34,768 from Indonesia, and 23,726 from Thailand studying overseas (OECD 2006, UNESCO website database). Of these 10,631 Korean, 4,727 Indonesian and 4,982 Thai students were studying in Australia. Published by epublications@scu, 2009 2 3
Journal of Economic and Social Policy, Vol. 13, Iss. 1 [2009], Art. 7 made by students, but it should be noted that the general fall in incomes in those three countries might also have been a factor. The purpose of this study is to determine if there is a link between changes in exchange rates and the decisions of students to study at Australian and New Zealand universities. In doing so it is possible to concentrate not just on the influence of exchange rate movements and growth in real GDP in the countries of student origins but also look at such factors as the reputation of universities. Data has been provided by the New Zealand Government s Ministry of Education and the Australian Government s Department of Education, Science and Technology. Additional data on exchange rates and real GDP comes from the International Monetary Fund and the Asian Development Bank. In the case of Australia and New Zealand the presence of international students in those two countries universities has become increasingly important over the past ten years. Figure 3 gives the number of overseas students in Australian and New Zealand universities as a percentage of total students between 1994 and 2007. As can be seen in both cases there has been a substantial increase in international student numbers as a proportion of total students although New Zealand has experienced a decline since 2005. Table 2 shows the breakdown of the countries of origin of these students in Australia and New Zealand. As can be seen from the table New Zealand s overseas students are dominated more by students from China than Australia; but nonetheless in both cases Asian students dominate. http://epubs.scu.edu.au/jesp/vol13/iss1/7 3 4
Abbott and Ali: The Impact of Exchange Rate Variations and University Reputation Table 1: Foreign students: receiving and sending countries 2006 Receiving country Sending country No. % No. % United States 584,817 20.0 China 451,526 15.4 United Kingdom 330,078 11.3 India 148,116 5.1 Germany 261,363 8.9 Korea 103,625 3.5 France 247,510 8.5 Germany 78,242 2.7 Australia 184,710 6.3 France 65,780 2.2 Canada 148,164 5.1 Japan 61,035 2.1 Japan 130,124 4.4 Turkey 56,984 1.9 Russia 77,438 2.6 Morocco 55,189 1.9 New Zealand 67,697 2.3 United States 49,325 1.7 Spain 51,013 1.7 Russia 49,200 1.7 Italy 48,766 1.7 Malaysia 43,969 1.5 Belgium 47,012 1.6 Canada 43,582 1.5 Sweden 41,410 1.4 Greece 40,654 1.4 Malaysia 40,029 1.4 Italy 40,265 1.4 Switzerland 39,415 1.3 Kazakstan 36,628 1.3 Austria 39,329 1.3 Poland 36,129 1.2 Netherlands 36,427 1.2 Indonesia 34,768 1.2 Korea 22,200 0.8 Hong Kong 33,261 1.1 Ireland 12,745 0.4 Pakistan 28,037 1.0 Other 514,432 17.6 Other 1,468,364 50.2 Total 2,924,679 100.0 Total 2,924,679 100.0 Source: OECD 2006. Published by epublications@scu, 2009 4 5
Journal of Economic and Social Policy, Vol. 13, Iss. 1 [2009], Art. 7 Table 2: Overseas Students in Australia and New Zealand, 2006 Australia New Zealand No. % No. % China 52,322 20.9 China 21,036 49.4 Malaysia 28,521 11.4 United States 2,429 5.7 Singapore 27,068 10.8 India 2,143 5.0 Hong Kong 23,285 9.3 Korea 2,137 5.0 India 23,051 9.2 Japan 1,978 4.6 Indonesia 10,631 4.2 Malaysia 1,519 3.6 United States 9,379 3.7 Germany 1,272 3.0 Vietnam 5,736 2.3 Fiji 723 1.7 Thailand 4,982 2.0 United Kingdom 697 1.6 Korea 4,727 1.9 Vietnam 670 1.6 Japan 4,559 1.8 Thailand 653 1.5 Canada 4,188 1.7 Taiwan 538 1.3 Taiwan 3,923 1.7 Canada 523 1.2 Bangladesh 3,422 1.4 Tonga 452 1.1 UAE 3,416 1.4 Hong Kong 450 1.1 Sri Lanka 3,218 1.3 Indonesia 375 0.9 Germany 2,864 1.1 Russia 330 0.8 Norway 2,117 0.8 Philippines 317 0.7 Pakistan 1,771 0.7 Singapore 309 0.7 Fiji 1,485 0.6 France 307 0.7 Kenya 1,485 0.6 Norway 219 0.5 Mauritius 1,444 0.6 Sweden 208 0.5 Other 27,221 10.9 Other 3,304 7.0 Total 250,794 100.0 Total 42,589 100.0 Source: Australia, Department of Education, Science and Technology. New Zealand, Ministry of Education. Figures for Australia are for higher education, for New Zealand tertiary education http://epubs.scu.edu.au/jesp/vol13/iss1/7 5 6
Abbott and Ali: The Impact of Exchange Rate Variations and University Reputation 1.2 1.0 0.8 0.6 0.4 0.2 1994 Figure 1: Value of the Indonesian, Thai and Korean exchages rates compared to the Australian $: 1994=1.0 1995 1996 1997 1998 1999 2000 2001 Source: International Monetary Fund 2005. 2002 2003 Indonesia Korea Thailand 2004 15000.2 Figure 2: Student numbers from Indonesia, Thailand and Korea in Australian higher education Indonesia Thailand Korea 10000.2 5000.2 0.2 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Source: Department of Education, Science and Technology Figure 3: Proportion of international students in total higher education students: Australia and New Zealand, 1994-2007 percentage 30 25 20 15 10 5 0 1994 1995 Australia New Zealand 1996 1997 1998 1999 2000 Source: Australia, Department of Education, Science and Technology. New Zealand, Ministry of Education. 2001 2002 2003 2004 2005 2006 2007 Published by epublications@scu, 2009 6 7
Journal of Economic and Social Policy, Vol. 13, Iss. 1 [2009], Art. 7 Data and Methodology The main objective of this study is to quantify the impact of two independent variables (exchange rate variation and the reputation of the universities) on the choice of destination for students studying overseas. Some other economic factors that also may have an influence on the destination choice are also included such as the growth of per capita GDP and growth in real expenditure on public sector education. The other variables are included in the analysis because the impact of changes in the exchange rates are indirectly related to the growth of GDP in the participating countries. Similarly the change of expenditure on the public sector education in the country of origin has also an influenced the students ability to study overseas. The data for the destinations of the students used in the study is from 37 Australian universities and eight New Zealand universities over the years 2000 to 2004. 7 A list of these universities is provided in Table 3. For each of these universities, the change in student numbers from the major countries of origin was taken. These countries are China, India, Malaysia, Japan, Indonesia, Thailand, Korea, Singapore, Hong Kong and the United States. The period 2000 to 2004 was chosen because the data is readily available and not one disturbed by any major economic disturbances. The basic method was to run a regression using the change, over the time period of 2000 to 2004, in the exchange rate between each country of origin and either the Australian or New Zealand currency as the independent variable and the change in the number of students from each country of origin in each university as the dependent variable. Other relevant variables such as variations in GDP per capita, and real expenditure on public sector education have also been included. It is notable that the impact of the above mentioned variables generally happens after a certain time period, say the following year. For example if the exchange rate is reasonably high in New Zealand compared to China, the cost of education in New Zealand for Chinese students will be high, which will reduce the number of Chinese students enrolled in New Zealand in the flowing year. To understand the impact of the changes of the variables a time lag should also be used. For the sake of simplicity the equation was also estimated with the independent variables included with a one year time lag. 7 The data was derived from the statistical publications of the Australian Department of Education, Science and Technology and the New Zealand Government Ministry of Education. The data can be provided by the authors on request. http://epubs.scu.edu.au/jesp/vol13/iss1/7 7 8
Abbott and Ali: The Impact of Exchange Rate Variations and University Reputation Table 3: Universities used in this study Australian New Zealand Australian Catholic University Auckland University of Technology Australian National University Lincoln University Central Queensland University Massey University Charles Darwin University University of Auckland Charles Sturt University University of Canterbury Curtin University of Technology University of Otago Deakin University University of Waikato Edith Cowan University Victoria University of Wellington Flinders University Griffith University James Cook University La Trobe University Macquarie University Monash University Murdoch University Queensland University of Technology RMIT University Southern Cross University Swinburne University of Technology University of Adelaide University of Ballarat University of Canberra University of Melbourne University of New England University of Newcastle University of Queensland University of South Australia University of Southern Queensland University of Sydney University of Technology, Sydney University of the Sunshine Coast University of Western Australia University of Western Sydney University of Wollongong University of Tasmania Victoria University of Technology Published by epublications@scu, 2009 8 9
Journal of Economic and Social Policy, Vol. 13, Iss. 1 [2009], Art. 7 Results and Discussion Equation 1 has been developed by taking the annual change in student numbers ( S) that came from each country of origin in each Australian and New Zealand university (for each of the years 2001 to 2004) as the dependent variable and the following as independent variables: The change in the exchange rate between the country of origin and country of destination (Australia or New Zealand) ( Ed); The change in the exchange rate between the country of origin and a country that competes with Australia and New Zealand for students (i.e. the United States. The study used the United States in this fashion as it is the world s largest education exporter, enrolling about 20 percent of the total.) ( Ec) The growth of per capita real GDP in the country of origin ( Y); and The growth of real government expenditure on education in the country of origin ( G). equation 1: S =α + β 1 Ed + β 2 Ec + β 3 Y+ β 4 G Where, α represents the constant of the equation, and β represents the coefficients of correlation. In the model, the change of student numbers have been calculated by subtracting the student numbers of the year under consideration from that of the previous year. For example, say there was a total of 100 international students enrolled at different universities in Australia in 2003 and a total of 90 international students enrolled in 2002. In that case the change in student numbers ( S) is 10. The same technique has been used to measure the variations of the other variables such as Ed, Ec, Y, and G. Further, we have calculated the variations of each variable, dependent and independent, for every year from 2000 to 2003. It is notable, that the positive sign of the coefficient of the model shows a positive impact and that of the negative sign shows the negative impact on the total number of students ( S). For example, a negative sign for Ec means the exchange rate of the competitive country (the United States) fell which meant that more international students will enrol in American and less in Australia or New Zealand. The application of a similar method to developing this model can be seen in Baltagi (2005) and Frechtling (1996). http://epubs.scu.edu.au/jesp/vol13/iss1/7 9 10
Abbott and Ali: The Impact of Exchange Rate Variations and University Reputation The estimated equation is as follows: equation 1.1 S = 19.262 + 0.215 Ed 0.060 Ec + 0.147 Y - 0.060 G Significance levels and t-values of the variables of equation 1.1 are shown below: Variable α Ed Ec Y G t- value 1.825 6.515-1.892 4.916-1.875 sig level.068.000.059.000.061 Equation 1.1 shows that: the relationship of the variation of student numbers with the variation of the current year s exchange rate between the countries of origin and destination is significant. The relation between the change in this exchange rate and the growth of real GDP is also significant (both have a significance level of 0.000). The term significance explains whether the relationship between the exchange rate variation and other variables is meaningful or not. The figure 0.000 tells us the relationship is meaningful at 99 percent confidence level; the relationship between the variation of student numbers and the variation of the country of origin s exchange rate with the competitive destination s currency is also close to significant (significance level 0.059). The sign here is a negative one which is what we would expect. For example, if the value of United States currency increased compared to that of New Zealand, the cost of education will be higher in the United States compared to New Zealand. In that case New Zealand might be the better choice as the destination. the R 2 is only 0.036 which indicates that about 96 percent of factors that might have an influence in choosing a destination by international students are not included in the equation. There may be, for example, some degree of influence on this choice through such things as cultural affinity, immigration plans, family connections or other factors; the Standard Error of the estimation is 220.6345; the signs of the t-values and β values of the respective variables support the validity of the model. Taking the same variables in Equation 1 we can add three dummy variables to indicate various characteristics of the universities in the study. This is shown in Equation 2. These indicate whether the universities are regionally located (R); are Dawkins universities (D) - that is a university that converted from a Published by epublications@scu, 2009 10 11
Journal of Economic and Social Policy, Vol. 13, Iss. 1 [2009], Art. 7 College of Advanced Education or Polytechnic in the years 1989 to 1999 - or have a major share of their international students in offshore campuses (O). These dummy variables are: R - Equal to 1 if the university is mainly based in a regional centre rather than a large metropolitan one. 8 Location can have an important influence on a student s choice. A student may prefer to study at a university which is close to employment opportunities, entertainment and other amenities. D - Equal to 1 if the university is a Dawkins university, that is converted from a College of Advanced Education or Polytechnic in the years 1989 to 1999; O Indicates the degree to which students are accommodated in offshore programmes. A figure of 0 indicates that virtually no students are studying in this fashion, 1 mean 5 to 10 percent are, 2, means between 11 and 40 percent are and 3 mean greater than 40 percent are. equation 2: S =α + β 1 Ed + β 2 Ec + β 3 Y+ β 4 G + β 5 R + β 6 D + β 7 O The estimated equation is as follows: equation 2.1: S = -14.389 + 0.214 Ed 0.060 Ec + 0.147 Y 0.059 G + 0.080R + 0.054D + 0.038O Significance levels and t-values of the variables of equation 2.1 are shown below: Variable α Ed Ec Y G R D O t- value -1.049 6.509-1.893 4.927-1.876 2.979 1.949 1.360 sig level.294.000.059.000.061.003.051.174 8 Metropolitan centres include Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra, Wellington, and Auckland. http://epubs.scu.edu.au/jesp/vol13/iss1/7 11 12
Abbott and Ali: The Impact of Exchange Rate Variations and University Reputation Equation 2.1 indicates that: the relationship between the variation of student numbers and the variation of the exchange rate, the growth of real GDP per capita, the exchange rate to the competitive destination s exchange rate, and the regional category of the university is highly significant (0.000, 0.000 and 0.003 respectively); the R 2 is still only 0.048 which indicates that there is about 95 percent of factors that might have an impact on choosing the study destination but has not been covered in this equation. Other factors are therefore important. Analysis of these factors is beyond the scope of this paper however, the signs of the t-values and the β values of the respective variables support the validity of the model. Taking the same variables in Equation 2 and adding the changes in Ed, Ec, Y and G with a one-year time lag we have developed Equation 3. equation 3: S =α+ β 1 Ed + β 2 Ed -1 + β 3 Ec + β 4 Ec -1 + β 5 Y + β 6 Y -1 + β 7 G + β 8 G -1 + β 9 R + β 10 D + β 11 O The estimated equation is as follows: equation 3.1 S = 67.354 + 0.266 Ed 0.139 Ed -1 0.073 Ec + 0.166 Ec -1 + 0.111 Y + 0.037 Y -1-0.009 G 0.045 G -1 + 0.089R + 0.059D + 0.033O Significance levels and t-values of the variables of equation 3.1 are shown below: Variable α E d E d-1 E c Ec - 1 Y Y - 1 G G -1 R D O t- value 1.616 6.427-1.518-1.788 1.786 2.076 -.733 -.203-1.007 2.72 2 1.743.981 sig level.106.000.129.074.074.038.464.839.314.007.082.327 Equation 3.1 shows that: like Equations 1.1 and 2.1, the relationship between the variation in student numbers and the variation of the current year s exchange rate in the destination country and the growth of GDP in the country of origin are both highly significant (0.000 and 0.038 respectively); Published by epublications@scu, 2009 12 13
Journal of Economic and Social Policy, Vol. 13, Iss. 1 [2009], Art. 7 in contrast, the relationship with the exchange rate between the country of origin and competitive country and with growth in real expenditure on education are not significant (0.074 and 0.839 respectively); regarding the influence of three types of university category the relationship of the regional category university is very significant (significance level 0.007). The influence from the other two categories is not statistically significant. out of three types of university, regional category university always appear more attractive for overseas students compared to the other two types. The R 2 = 0.075 in equation 3.1, however, the signs of the t-values and the β values of the respective variables support the validity of the model. Standard Error of the estimate is 258.5757 It is clear from Equations 1 to 3 that the variation of exchange rate, variation of real GDP growth and the status of university have an impact on the choice of destination for international students. Based on the Equations 1 to 3, the following mathematical model has been developed. The model: Where S = f ( Ed + Y + U) + C Ed represents the variation of exchange rate at country of origin with respect to country of destination, Y represents the variation of growth of GDP in country of origin, U represents the status of the university in the country of destination and C represents the constant of unexplained factors. Individual Countries of Origin In the previous section it was established that exchange rate variations have an influence on the choice of students study destination. In that analysis, universities in Australia and New Zealand were chosen as study destinations while ten countries were chosen as countries of origin (China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Singapore, Thailand and the United States). An aspect of interest is the degree to which the students from the various countries of origin are sensitive to changes in the exchange rate between their country and that of the country of destination. To analyse this we have developed one regression equation for each country of origin by taking the variation in student numbers as the dependent variable and exchange rate variations and real GDP per capita variations as independent http://epubs.scu.edu.au/jesp/vol13/iss1/7 13 14
Abbott and Ali: The Impact of Exchange Rate Variations and University Reputation variables. Each country of origin has been ranked on the basis of its corresponding t value. Table 4: Countries According to their Sensitivity to Exchange Rate Variations Country Beta value t value Significance level 1 United States 0.779 4.945 0.000 2 Hong Kong 0.505 3.131 0.002 3 Malaysia 0.296 2.576 0.011 4 Japan -0.223-2.392 0.018 5 Singapore 0.184 1.909 0.059 6 Thailand 0.275 1.478 0.142 7 Indonesia -0.115-1.243 0.216 8 Korea 0.098 1.047 0.297 9 China 0.160 0.549 0.584 10 India 0.025 0.076 0.940 Table 4 shows the distribution of countries according to their sensitivity to exchange rate variations. It can be seen from Table 4 that: the relationship between the variation of the exchange rate is significant for the United States (0.000), Hong Kong, Malaysia and Japan (0.018); the United States is the most sensitive country to exchange rate variations, followed by Hong Kong, Malaysia and Japan. The least sensitive country is India. Table 5 shows the distribution of countries according to their sensitivity to changes in real GDP per capita. Table 5: Countries According to their Sensitivity to Changes in Real GDP per capita. Country Beta value t value Significance level 1 Japan -0.421-4.527 0.000 2 United States 0.608 3.856 0.000 3 Hong Kong 0.444 2.749 0.007 4 Malaysia 0.263 2.283 0.024 5 Singapore 0.199 2.065 0.041 6 Korea 0.190 2.038 0.044 7 Thailand 0.274 1.475 0.143 8 India -0.201-0.608 0.544 9 China -0.070-0.242 0.809 10 Indonesia -0.009-0.097 0.923 Published by epublications@scu, 2009 14 15
Journal of Economic and Social Policy, Vol. 13, Iss. 1 [2009], Art. 7 It is seen from Table 5 that: the relationship between the variation of real GDP per capita is highly significant for Japan and the United States (0.000) followed by Hong Kong and Malaysia (0.007 and 0.024); Japan is the most sensitive country to a change in real GDP per capita (t= -4.527 and 3.856); the least sensitive country is Indonesia. It appears from Table 4 and 5 that economically rich countries such as the United States, Japan and Hong Kong are highly sensitive to variation of the exchange rate as well as the variation of real GDP per capita growth. Policy Implications In this study it has been established that changes in exchange rates do have an impact on the decision made by students about which country they wish to study in. Not only the relationship between the exchange rate between countries of origin and Australia and New Zealand is important but also the exchange rate between the country of origin and other possible destinations is important. This means that the cost of education could be considered as an important element of the education policy for Australia and New Zealand. Education policy should be based on competitive cost. If the costs of education - such as tuition fees, living costs and so on - are relatively high in Australia compared to that of the United States then international students might be more interested in studying in the United States rather than Australia. The impact of exchange rates on the decision made by students to study abroad is not uniform across all countries of origin. Students from some countries such as the United States and Japan are more affected by changes in exchange rates than student from countries such as India and China. This would suggest that if institutions and national governments wish to reduce their exposure to exchange rate fluctuations then they should shift their marketing efforts from countries like the United States, Japan and Korea to countries like China, India, Thailand, and Indonesia where the exchange rate variation has less impact. It has also been established in this study that university reputation is a factor which influences students choice of study destination. The maintenance of quality of education standards is an important element, both for individual universities and for national governments. As the education exporting market is becoming more competitive, the maintenance of education standards will be an ongoing challenge for education providers. http://epubs.scu.edu.au/jesp/vol13/iss1/7 15 16
Abbott and Ali: The Impact of Exchange Rate Variations and University Reputation Finally it should be noted that exchange rate variations appear to have a smaller impact on those students from countries with relatively low levels of real GDP per capita. In the context of Australia and New Zealand, this is interesting as it is exactly from these countries that many of the students come from. Clearly there must be a range of other important factors that need studying in order to determine what influences students when they make choices to study overseas. These might include such things as immigration laws, the herd mentality of students and the political and cultural reputation of the countries of destination. Conclusion This paper examines the impact of exchange rate fluctuations and the university reputation on the choice of study destinations of international students. The analysis was particularly focused on Australia and New Zealand as the education exporting countries. The study used data from the number students studying in universities in Australia and New Zealand and their country of origin it possible ascertain the degree to which they are influenced by changes in relative exchange rates. The study has found that the impact of exchange rate variations and the university reputation both have an impact on the choice of study destinations for international students. The impact of exchange rates on the decision made by students is by no means uniform across all countries of origin. Students from some countries such as the United States and Japan are more affected by changes in exchange rates then student from countries such as India. Finally it should be noted that exchange rate variations appear to have a smaller impact on those students from countries with relatively low levels of real GDP per capita. In the context of Australia and New Zealand this is interesting as it is exactly from these countries that many of the students studying in these two countries come from. Clearly there must be a range of other important factors that need studying in order to determine what influences students when they make choices to study overseas. These might include such things as immigration laws, the herd mentality of students and the political and cultural reputation of the countries of estimation. University and national governments would do well to bear these conclusions in mind when they are undertaking development of their marketing strategies and policies. Published by epublications@scu, 2009 16 17
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