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Modelling and Forecasting the UK Tourism Growth Cycle in Algarve

Author

Listed:
  • Jorge L.M. Andraz

    (Centre for Advanced Studies in Economics and Econometrics (CASEE), Faculty of Economics, University of Algarve, Campus de Gambelas, 8005-139 Faro, Portugal)

  • Pedro M.D.C.B. Gouveia

    (Escola Superior de Gestão, Hotelaria e Turismo (ESGHT) and Centre for Advanced Studies in Economics and Econometrics (CASEE), University of Algarve, Faro, Portugal)

  • Paulo M.M. Rodrigues

    (Banco de Portugal, Lisbon, Faculty of Economics, Universidade Nova de Lisboa and Centre for Advanced Studies in Economics and Econometrics (CASEE), Faculty of Economics, University of Algarve, Campus de Gambelas, 8005-139 Faro, Portugal)

Abstract

Over the past three decades, Portugal has developed a strong economic dependence on tourism, which has several implications for the country's overall economic development. Tourism is an activity that is interrelated strongly with the economic system since Portugal as a whole and specific regions in particular rely on the performance of tourism for their economic activity. Moreover, because economic cycles affect tourism development, it is highly vulnerable to economic fluctuations. Most tourists who visit Portugal are from the European Union, especially Western Europe. Statistics are based on the number of overnight stays in hotel accommodation and other similar establishments. In 2005, the main source markets were the UK (30.7%), Germany (16.5%), Spain (11.5%), the Netherlands (6.8%), France (4.7%), Ireland (3.6%) and Italy (3.1%). These values show that the UK has the greatest share of visitors to Algarve. The purpose of this paper is to propose a modelling approach that best fits the tourism flow pattern in order to support forecasting. The paper contributes to our understanding of the relationship between economic cycles and tourism flows to Portugal (Algarve) and explores the potential of applying the diffusion index model proposed by Stock and Watson (1999, 2002) for tourism demand forecasting.

Suggested Citation

  • Jorge L.M. Andraz & Pedro M.D.C.B. Gouveia & Paulo M.M. Rodrigues, 2009. "Modelling and Forecasting the UK Tourism Growth Cycle in Algarve," Tourism Economics, , vol. 15(2), pages 323-338, June.
    • Handle: RePEc:sae:toueco:v:15:y:2009:i:2:p:323-338
    DOI: 10.5367/000000009788254386
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    References listed on IDEAS

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    1. James H. Stock & Mark W. Watson, 1993. "Business Cycles, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number stoc93-1, May.
    2. Heij, C. & van Dijk, D.J.C. & Groenen, P.J.F., 2006. "Improved Construction of diffusion indexes for macroeconomic forecasting," Econometric Institute Research Papers EI 2006-03-REV, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    3. Roberto Tatiwa Ferreira & Herman Bierens & Ivan Castelar, 2005. "Forecasting Quarterly Brazilian GDP Growth Rate With Linear and NonLinear Diffusion Index Models," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 6(3), pages 261-292.
    4. Elena Angelini & Jérôme Henry & Ricardo Mestre, 2001. "A multi-country trend indicator for euro area inflation: computation and properties," BIS Papers chapters, in: Bank for International Settlements (ed.), Empirical studies of structural changes and inflation, volume 3, pages 81-108, Bank for International Settlements.
    5. Stock, James H. & Watson, Mark W. (ed.), 1993. "Business Cycles, Indicators, and Forecasting," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226774886, December.
    6. Chang-Jin Kim & Charles R. Nelson, 1998. "Business Cycle Turning Points, A New Coincident Index, And Tests Of Duration Dependence Based On A Dynamic Factor Model With Regime Switching," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 188-201, May.
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    8. Mario Forni & Lucrezia Reichlin, 1998. "Let's Get Real: A Factor Analytical Approach to Disaggregated Business Cycle Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(3), pages 453-473.
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    Cited by:

    1. Andraz, Jorge M. & Rodrigues, Paulo M.M., 2016. "Monitoring tourism flows and destination management: Empirical evidence for Portugal," Tourism Management, Elsevier, vol. 56(C), pages 1-7.
    2. Jorge M. Andraz & Nélia M. Norte & Hugo S. Gonçalves, 2016. "Do tourism spillovers matter in regional economic analysis? An application to Portugal," Tourism Economics, , vol. 22(5), pages 939-963, October.
    3. Faruq Umar, Quadri, 2019. "A Re-Examination of the Relationship between Foreign Flows and Economic Growth in LLDCs: Dynamic Fixed Effects (DFE)," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 6(2), pages 169-179.
    4. Jorge M. L. Andraz & Raúl F. C. Guerreiro & Paulo M. M. Rodrigues, 2018. "Persistence of travel and leisure sector equity indices," Empirical Economics, Springer, vol. 54(4), pages 1801-1825, June.
    5. repec:ptu:bdpart:r201613 is not listed on IDEAS

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