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Aggregation, Heterogeneous Autoregression and Volatility of Daily International Tourist Arrivals and Exchange Rates

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  • Chia-Lin Chang

    (Department of Applied Economics, National Chung Hsing University)

  • Michael McAleer

    (Erasmus University Rotterdam, Tinbergen Institute, The Netherlands, and Institute of Economic Research, Kyoto University)

Abstract

TTourism is a major source of service receipts. The two leading tourism countries for Taiwan are Japan and USA. Daily data from 1/1/1990 to 31/12/2008 are used to model tourist arrivals from the world, USA and Japan to Taiwan, as well as their associated volatility. Inclusion of the exchange rate allows approximate daily price effects to be captured. The Heterogeneous Autoregressive (HAR) model is used to approximate long memory properties in daily exchange rates and international tourist arrivals, test whether alternative short and long run estimates of conditional volatility are sensitive to the approximate long memory in the conditional mean, examine asymmetry and leverage in volatility, and examine the effects of temporal and spatial aggregation. Asymmetry (though not leverage) is found for several alternative HAR models. For policy purposes, the empirical results suggest that an arbitrary choice of data frequency or spatial aggregation will not lead to robust findings.

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Bibliographic Info

Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 712.

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Length: 45pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:kyo:wpaper:712

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Keywords: International tourist arrivals; exchange rates; global financial crisis; GARCH; GJR; EGARCH; HAR; approximate long memory; temporal aggregation; spatial aggregation; daily effects; weekly effects; asymmetry; leverage.;

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References

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  1. McAleer, M.J. & Jimenez-Martin, J-A. & Perez-Amaral, T., 2008. "A decision rule to minimize daily capital charges in forecasting value-at-risk," Econometric Institute Research Papers EI 2008-34, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  2. McAleer, Michael & Medeiros, Marcelo C., 2008. "A multiple regime smooth transition Heterogeneous Autoregressive model for long memory and asymmetries," Journal of Econometrics, Elsevier, Elsevier, vol. 147(1), pages 104-119, November.
  3. Massimiliano Caporin & Michael McAleer, 2010. "Do We Really Need Both BEKK and DCC? A Tale of Two Multivariate GARCH Models," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-713, CIRJE, Faculty of Economics, University of Tokyo.
  4. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 987-1007, July.
  5. McAleer, Michael & Jimenez-Martin, Juan-Angel & Perez Amaral, Teodosio, 2009. "Optimal Risk Management Before, During and After the 2008-09 Financial Crisis," MPRA Paper 20975, University Library of Munich, Germany, revised 20 Sep 2009.
  6. Michael McAleer & Juan-Angel Jimenez-Martin & Teodosio Perez-Amaral, 2009. "Has the Basel II Accord Encouraged Risk Management During the 2008-09 Financial Crisis?," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-643, CIRJE, Faculty of Economics, University of Tokyo.
  7. Chia-Lin Chang & Michael McAleer & Dan Slottje, 2009. "Modelling International Tourist Arrivals and Volatility: An Application to Taiwan," Documentos de Trabajo del ICAE, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico 0906, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
  8. Michael McAleer, 2009. "The Ten Commandments for Optimizing Value-at-Risk and Daily Capital Charges," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-652, CIRJE, Faculty of Economics, University of Tokyo.
  9. McAleer, Michael, 2005. "Automated Inference And Learning In Modeling Financial Volatility," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 21(01), pages 232-261, February.
  10. Ling, Shiqing & McAleer, Michael, 2003. "Asymptotic Theory For A Vector Arma-Garch Model," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 19(02), pages 280-310, April.
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  12. Chia-Lin Chang & Michael McAleer, 2009. "Daily Tourist Arrivals, Exchange Rates and Volatility for Korea and Taiwan," CARF F-Series, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo CARF-F-192, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
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  14. Juan-Ángel Jiménez-Martín & Michael McAleer & Teodosio Pérez-Amaral, 2009. "What Happened to Risk Management During the 2008-09 Financial Crisis?," Documentos de Trabajo del ICAE, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico 0919, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
  15. Ling, Shiqing & McAleer, Michael, 2002. "NECESSARY AND SUFFICIENT MOMENT CONDITIONS FOR THE GARCH(r,s) AND ASYMMETRIC POWER GARCH(r,s) MODELS," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 18(03), pages 722-729, June.
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  20. Jose Angelo Divino & Michael McAleer, 2009. "Modelling the Growth and Volatility in Daily International Mass Tourism to Peru," Documentos de Trabajo del ICAE, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico 0915, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
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  22. Shiqing Ling & Michael McAleer, 2001. "On Adaptive Estimation in Nonstationary ARMA Models with GARCH Errors," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0548, Institute of Social and Economic Research, Osaka University.
  23. Jose Angelo Divino & Michael McAleer, 2009. "Modelling and Forecasting Daily International Mass Tourism to Peru," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-651, CIRJE, Faculty of Economics, University of Tokyo.
  24. Jeantheau, Thierry, 1998. "Strong Consistency Of Estimators For Multivariate Arch Models," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 14(01), pages 70-86, February.
  25. Shiqing Ling & Michael McAleer, 2001. "Stationarity and the Existence of Moments of a Family of GARCH Processes," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0535, Institute of Social and Economic Research, Osaka University.
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Citations

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Cited by:
  1. Chia-Lin Chang & Thanchanok Khamkaew & Michael McAleer, 2010. "Estimating Price Effects in an Almost Ideal Demand Model of Outbound Thai Tourism to East Asia," KIER Working Papers, Kyoto University, Institute of Economic Research 725, Kyoto University, Institute of Economic Research.
  2. Chang, Chia-Lin, 2014. "Modelling a Latent Daily Tourism Financial Conditions Index," MPRA Paper 54887, University Library of Munich, Germany.
  3. Chia-Lin Chang & Hui-Kuang Hsu & Michael McAleer, 2013. "Is Small Beautiful? Size Effects of Volatility Spillovers for Firm Performance and Exchange Rates in Tourism," Documentos de Trabajo del ICAE, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico 2013-01, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
  4. Chia-Lin Chang & Hui-Kuang Hsu & Michael McAleer, 2013. "Is Small Beautiful? Size Effects of Volatility Spillovers for Firm Performance and Exchange Rates in Tourism," Tinbergen Institute Discussion Papers 13-008/III, Tinbergen Institute.

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