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A Tourism Conditions Index

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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.

Suggested Citation

  • Chia-Lin Chang & Hui-Kuang Hsu & Michael McAleer, 2014. "A Tourism Conditions Index," Working Papers in Economics 14/03, University of Canterbury, Department of Economics and Finance.
  • Handle: RePEc:cbt:econwp:14/03
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    File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1403.pdf
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    References listed on IDEAS

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    1. Chang, Chia-Lin & McAleer, Michael & Tansuchat, Roengchai, 2011. "Crude oil hedging strategies using dynamic multivariate GARCH," Energy Economics, Elsevier, vol. 33(5), pages 912-923, September.
    2. 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.
    3. Scott Brave & R. Andrew Butters, 2011. "Monitoring financial stability: a financial conditions index approach," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 22-43.
    4. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    5. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
    6. Matheson, Troy D., 2012. "Financial conditions indexes for the United States and euro area," Economics Letters, Elsevier, vol. 115(3), pages 441-446.
    7. Massimiliano Caporin & Michael McAleer, 2013. "Ten Things You Should Know about the Dynamic Conditional Correlation Representation," Econometrics, MDPI, Open Access Journal, vol. 1(1), pages 1-12, June.
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    Cited by:

    1. Chang, Chia-Lin, 2015. "Modelling a latent daily Tourism Financial Conditions Index," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 113-126.

    More about this item

    Keywords

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

    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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