Financial volatility, macroeconomic volatility and tourism development

Abstract

This dissertation examines the causal relationship between financial performance and tourism development as well as economic performance and tourism development both in mean and variance for four countries. It uses three different variables – share price index, industrial production and the number of total tourist arrivals for each country. It employs a model which detects the appropriates ARCH and GARCH models in order to apply the causality tests of Cheung & Ng and Hong. The empirical results indicate causality in mean from stock market to tourism. Also it is found that causality in mean between economic performance to tourism is bidirectional according to the Hong test. Furthermore it is noticed that volatility spillovers are detected fewer times than return spillovers and the main directions that are held are from stock market to tourism.