Are shocks to tourism transitory at business cycle horizons?

Author: Narayan, Paresh Kumar

Source: Applied Economics, Volume 43, Number 16, 1 June 2011 , pp. 2071-2077(7)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

The goal of this article is to propose a theoretical framework based on a macro model that can be used to examine the relative importance of permanent and transitory shocks in explaining variations in tourist expenditure and Gross Domestic Product (GDP) at business cycle horizons. We estimate the model for Australia. Our findings reveal a common-trend and common-cycle relationship among tourist expenditure and GDP, and the variance decomposition analysis of shocks reveals that at business cycle horizons permanent shocks explain the bulk of the variations in output, while transitory shocks explain the bulk of the variations in tourist expenditure.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840903035951

Affiliations: School of Accounting, Finance and Economics,Deakin University, BurwoodMelbourne 321, Australia

Publication date: June 1, 2011

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