A Dynamic Correlation Approach of the Swiss Tourism Income
We apply cross-spectral methods, dynamic correlation index of comovements and a VAR model to study the cyclical components of GDP and tourism income of Switzerland with annual data for the period 1980 – 2007. We find evidence of 4 dominant cycles for GDP and an average duration between 9 and 11 years. Tourism income is characterized by more cycles, giving an average cycle of about 8 years. There are also common cycles both in the typical business cycle and in the longer-run frequency bands. Lead / lag analysis shows that the two cyclical components are roughly synchronized. Simulations via a VAR model show that the maximum effect of 1% GDP shock on tourism income is higher than the maximum effect of 1% tourism income shock on GDP. The effects of these shocks last for about 12-14 years, although the major part of the shocks is absorbed within 5-6 years.
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