Objective: The tourism sector, a significant component of the global service industry, is vital for a nation’s economic development and income generation. Therefore, it is essential to ascertain the factors influencing the demand for this type of service. The main aim of this study is to examine the impact of exchange rates on tourism demand in Iran. Methods: This study examined the long-term and short-term relationships between Iran’s tourism arrivals and variables such as the exchange rate, political risk, and other factors influencing tourism demand, including inflation, foreign investment, oil revenue, GDP, and population, employing time series data from 1995 to 2024 and the Dynamic ARDL simulation method. Results: The results indicate that political risk significantly detrimentally affects Iran’s tourism demand, whereas the exchange rate has a notable positive influence. Since 2010, when the fourth round of sanctions began, political risk has escalated owing to internal and external conflicts, negatively impacting international tourism demand. Conclusions: The interplay between exchange rate variables and political risk was found to positively influence tourism demand. The increase in the exchange rate decreases the costs of tourism services, and also stimulates creative business endeavors in the tourism industry.
