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Modelling the Volatility in Short and Long Haul Japanese Tourist Arrivals to New Zealand and Taiwan

Author

Listed:
  • Michael McAleer

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

  • Chia-Lin Chang

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

  • Christine Lim

    (Division of Marketing and International Business Nanyang Technological University Singapore)

Abstract

This paper estimates the effects of short and long haul volatility (or risk) in monthly Japanese tourist arrivals to Taiwan and New Zealand, respectively. In order to model appropriately the volatilities of international tourist arrivals, we use symmetric and asymmetric conditional volatility models that are commonly used in financial econometrics, namely the GARCH (1,1), GJR (1,1) and EGARCH (1,1) models. The data series are for the period January 1997 to December 2007. The volatility estimates for the monthly growth in Japanese tourists to New Zealand and Taiwan are different, and indicate that the former has an asymmetric effect on risk from positive and negative shocks of equal magnitude, while the latter has no asymmetric effect. Moreover, there is a leverage effect in the monthly growth rate of Japanese tourists to New Zealand, whereby negative shocks increase volatility but positive shocks of similar magnitude decrease volatility. These empirical results seem to be similar to a wide range of financial stock market prices, so that the models used in financial economics, and hence the issues related to risk and leverage effects, are also applicable to international tourism flows.

Suggested Citation

  • Michael McAleer & Chia-Lin Chang & Christine Lim, 2011. "Modelling the Volatility in Short and Long Haul Japanese Tourist Arrivals to New Zealand and Taiwan," KIER Working Papers 783, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:783
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP783.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Michael McAleer, 2015. "The Fundamental Equation in Tourism Finance," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 8(4), pages 1-6, December.

    More about this item

    Keywords

    Tourist arrivals; long haul; short haul; risk; conditional volatility; asymmetric effect; leverage.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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