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

  • 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)

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.

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File URL: http://www.kier.kyoto-u.ac.jp/DP/DP783.pdf
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Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 783.

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Date of creation: Jul 2011
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Handle: RePEc:kyo:wpaper:783
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  1. Michael McAleer & Les Oxley, 2005. "The Ten Commandments for Academics," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 823-826, December.
  2. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  3. Ling, Shiqing & McAleer, Michael, 2002. "Stationarity and the existence of moments of a family of GARCH processes," Journal of Econometrics, Elsevier, vol. 106(1), pages 109-117, January.
  4. Li, W K & Ling, Shiqing & McAleer, Michael, 2002. " Recent Theoretical Results for Time Series Models with GARCH Errors," Journal of Economic Surveys, Wiley Blackwell, vol. 16(3), pages 245-69, July.
  5. McAleer, Michael, 2005. "Automated Inference And Learning In Modeling Financial Volatility," Econometric Theory, Cambridge University Press, vol. 21(01), pages 232-261, February.
  6. McAleer, M.J., 2008. "The ten commandments for optimizing value-at-risk and daily capital charges," Econometric Institute Research Papers EI 2008-32, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  7. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
  8. Shiqing Ling & Michael McAleer, 2001. "On Adaptive Estimation in Nonstationary ARMA Models with GARCH Errors," ISER Discussion Paper 0548, Institute of Social and Economic Research, Osaka University.
  9. Lee, Sang-Won & Hansen, Bruce E., 1994. "Asymptotic Theory for the Garch(1,1) Quasi-Maximum Likelihood Estimator," Econometric Theory, Cambridge University Press, vol. 10(01), pages 29-52, March.
  10. Perron, Pierre & Ng, Serena, 1996. "Useful Modifications to Some Unit Root Tests with Dependent Errors and Their Local Asymptotic Properties," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 435-63, July.
  11. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
  12. Ling, Shiqing & McAleer, Michael, 2003. "Asymptotic Theory For A Vector Arma-Garch Model," Econometric Theory, Cambridge University Press, vol. 19(02), pages 280-310, April.
  13. Lim, Christine & McAleer, Michael & Min, Jennifer C.H., 2009. "ARMAX modelling of international tourism demand," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(9), pages 2879-2888.
  14. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
  15. McAleer, Michael & Chan, Felix & Marinova, Dora, 2007. "An econometric analysis of asymmetric volatility: Theory and application to patents," Journal of Econometrics, Elsevier, vol. 139(2), pages 259-284, August.
  16. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  17. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  18. Jeantheau, Thierry, 1998. "Strong Consistency Of Estimators For Multivariate Arch Models," Econometric Theory, Cambridge University Press, vol. 14(01), pages 70-86, February.
  19. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
  20. 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, vol. 18(03), pages 722-729, June.
  21. Shareef, Riaz & McAleer, Michael, 2008. "Modelling international tourism demand and uncertainty in Maldives and Seychelles: A portfolio approach," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 78(2), pages 459-468.
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