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A Tourism Financial Conditions Index for Tourism Finance

Author

Listed:
  • Chia-Lin Chang

    (Department of Applied Economics, Department of Finance, National Chung Hsing University, Taiwan)

  • Hui-Kuang Hsu

    (Department of Finance, National Pingtung University, Taiwan)

  • Michael McAleer

    (National Tsing Hua University, Taiwan; University of Sydney Business School, Australia; Erasmus University Rotterdam, The Netherlands;Complutense University of Madrid, Spain; Yokohama National University, Japan)

Abstract

The paper uses monthly data on tourism related factors from April 2005 - June 2016 for Taiwan that applies factor analysis and Chang’s (2015) novel approach for constructing a tourism financial indicator, namely the Tourism Financial Conditions Index (TFCI). The TFCI is an adaptation and extension of the widely-used Monetary Conditions Index (MCI) and Financial Conditions Index (FCI) to tourism stock data. However, the method of calculation of the TFCI is different from existing methods of constructing the MCI and FCI in that the weights are estimated empirically. The empirical findings show that TFCI is statistically significant using the estimated conditional mean of the tourism stock index returns (RTS). Granger Causality tests show that TFCI shows strong feedback on RTS. An interesting insight is that the empirical results show a significant negative correlation between F1_visistors and RTS, implying that tourism authorities might promote travel by the “rich”, and not only on inbound visitor growth. The use of market returns on the tourism stock sub-index as the sole indicator of the tourism sector, as compared with the general activity of economic variables on tourism stocks, is shown to provide an exaggerated and excessively volatile explanation of tourism financial conditions.

Suggested Citation

  • Chia-Lin Chang & Hui-Kuang Hsu & Michael McAleer, 2017. "A Tourism Financial Conditions Index for Tourism Finance," Tinbergen Institute Discussion Papers 17-071/III, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20170071
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    References listed on IDEAS

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    Cited by:

    1. Chia-Lin Chang & Michael McAleer & Chien-Hsun Wang, 2017. "An Econometric Analysis of ETF and ETF Futures in Financial and Energy Markets Using Generated Regressors," IJFS, MDPI, vol. 6(1), pages 1-24, December.
    2. Serdar Ongan & Cem Işik & Dilek Özdemir, 2017. "The Effects of Real Exchange Rates and Income on International Tourism Demand for the USA from Some European Union Countries," Economies, MDPI, vol. 5(4), pages 1-11, December.

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    More about this item

    Keywords

    Monetary Conditions Index; Financial Conditions Index; Model-based Tourism Financial Conditions Index; Unbiased Estimation;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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