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The study uses a Markov-switching model (MSM) to investigate the relationship between foreign-exchange earnings from tourism and macroeconomic factors in Taiwan. The MSM decomposes foreign-exchange cycles into a high growth stage (HGS) and a low growth stage (LGS). The steady-state probability remains foreign-exchange earnings from tourism in the HGS and LGS are 0.7486 and 0.8631, respectively. The findings indicate that foreign-exchange earnings from tourism in Taiwan have a high tendency to stay in the LGS state and a low tendency to shift from the LGS state to the HGS state. Furthermore, the results show that macroeconomic factors in Taiwan can continuously affect foreign-exchange earnings from tourism in the HGS. [ABSTRACT FROM PUBLISHER]