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A Tourism Conditions Index

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Author Info

  • Chia-Lin Chang

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

  • Hui-Kuang Hsu

    (Department of Finance and Banking National Pingtung Institute of Commerce, Taiwan)

  • Michael McAleer

    (Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute, The Netherlands, Department of Quantitative Economics, Complutense University of Madrid, and Institute of Economic Research, Kyoto University.)

Abstract

This paper uses monthly data from April 2005 to August 2013 for Taiwan to propose a novel tourism indicator, namely the Tourism Conditions Index (TCI). TCI accounts for the spillover weights based on the Granger causality test and estimates of the multivariate BEKK model for four TCI indicators to predict specific tourism and economic environmental indicators for Taiwan. The foundation of the TCI is the Financial Conditions Index (FCI), which is derived from the Monetary Conditions Index (MCI). The empirical findings show that TCI weighted by spillovers reveal greater significance in forecasting the Composite Index (CI), an economic environmental indicator, than the Tourism Industry Index (TII), which is an existing indicator for the tourism industry that is listed on the Taiwan Stock Exchange (TWSE). Moreover, previous values of the alternative TCI and TII are shown to contain useful information in predicting both tourism and economic environmental factors. Overall, the new Tourism Conditions Index is straightforward to use and also provides useful insights in predicting tourism arrivals and the current economic environment.

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Bibliographic Info

Paper provided by Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico in its series Documentos de Trabajo del ICAE with number 2014-01.

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Length: 30 pages
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:ucm:doicae:1401

Note: For financial support, the first author is most grateful to the National Science Council, Taiwan, and the third author wishes to acknowledge the Australian Research Council and the National Science Council, Taiwan. **Corresponding author: changchialin@nchu.edu.tw Tel: +886 (04)22840350 ext 309; Fax: +886(04)22860255
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Related research

Keywords: Monetary Conditions Index (MCI); Financial Conditions Index (FCI); Tourism Conditions Index (TCI); BEKK; Spillovers; Granger causality.;

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References

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  1. Tansuchat, R. & Chang, C-L. & McAleer, M.J., 2010. "Crude Oil Hedging Strategies Using Dynamic Multivariate GARCH," Econometric Institute Research Papers EI 2010-10, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  2. Matheson, Troy D., 2012. "Financial conditions indexes for the United States and euro area," Economics Letters, Elsevier, vol. 115(3), pages 441-446.
  3. Massimiliano Caporin & Michael McAleer, 2013. "Ten Things You Should Know About the Dynamic Conditional Correlation Representation," KIER Working Papers 870, Kyoto University, Institute of Economic Research.
  4. Jan Hatzius & Peter Hooper & Frederic S. Mishkin & Kermit L. Schoenholtz & Mark W. Watson, 2010. "Financial Conditions Indexes: A Fresh Look after the Financial Crisis," NBER Working Papers 16150, National Bureau of Economic Research, Inc.
  5. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, Econometric Society, vol. 37(3), pages 424-38, July.
  6. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
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Cited by:
  1. Chang, Chia-Lin, 2014. "Modelling a Latent Daily Tourism Financial Conditions Index," MPRA Paper 54887, University Library of Munich, Germany.

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