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Aggregation, Heterogeneous Autoregression and Volatility of Daily International Tourist Arrivals and Exchange Rates

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Chang, Chia-Lin and McAleer, Michael (2011) Aggregation, Heterogeneous Autoregression and Volatility of Daily International Tourist Arrivals and Exchange Rates. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico; nº 13, 2011, ] (Unpublished)

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Abstract

Tourism is a major source of service receipts for many countries, including Taiwan. The two leading tourism countries for Taiwan are Japan and USA, which are sources of short and long haul tourism, respectively. As a strong domestic currency can have adverse effects on international tourist arrivals through the price effect, daily data from 1 January 1990 to 31 December 2008 are used to model the world price, exchange rates, and tourist arrivals from the world, USA and Japan to Taiwan, and their associated volatility. Inclusion of the exchange rate and its volatility captures approximate daily and weekly price and price volatility effects on world, US and Japanese tourist arrivals to Taiwan. The Heterogeneous Autoregressive (HAR) model is used to approximate the slowly decaying correlations associated with the long memory properties in daily and weekly exchange rates and international tourist arrivals, to test whether alternative short and long run estimates of conditional volatility are sensitive to the long memory in the conditional mean, to examine asymmetry and leverage in volatility, and to examine the effects of temporal and spatial aggregation. The approximate price and price volatility effects tend to be different, with the exchange rate typically having the expected negative impact on tourist arrivals to Taiwan, whereas exchange rate volatility can have positive or negative effects on tourist arrivals to Taiwan. For policy purposes, the empirical results suggest that an arbitrary choice of data frequency or spatial aggregation will not lead to robust findings as they are generally not independent of the level of aggregation used.


Item Type:Working Paper or Technical Report
Uncontrolled Keywords:International tourist arrivals, Exchange rates, Exchange rate volatility, GARCH, GJR, EGARCH, HAR, Long memory, temporal and spatial aggregation, Daily and weekly effects, Asymmetry, leverage.
Subjects:Social sciences > Economics > Econometrics
Social sciences > Economics > Economic indicators
JEL:C22, F31, G18, G32
Series Name:Documentos de Trabajo del Instituto Complutense de Análisis Económico
Volume:2011
Number:13
ID Code:12730
Deposited On:17 May 2011 09:17
Last Modified:17 Jun 2016 08:39

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