Purpose – development of the Tourism Industry Stress Index (TSI) and the Financial Stress Index (FSI) followed by an examination of their interaction. Design – The TSI, which aggregates tourist arrivals, overnight stays and net occupancy, was tested on data for Finland, Italy, Germany and Spain between 1993 and 2020. The FSI was composed of the S&P500 index, Brent oil futures, and the real effective exchange rate of the euro. Methodology / Approach – Both stress indices were calculated as the difference between the moving standard deviation and the moving average of the monthly growth rate of the selected indicators. We aggregated them by applying two alternative techniques: arithmetic mean and nonnormalized principal component analysis. The Granger causality test was utilised to assess the dependence between the indices. Findings – We identified periods of increased volatility in the European tourism market and described its connection to financial crises. The causality test of the FSI-TSI model showed that financial turmoil led to increased tourism market stress with an average lag of three months and a marginal effect of 0.2. Originality of the research – We recommend the Financial Stress Index as a predictor of the Tourism Industry Stress Index in the business cycle.
Volatility co-movements and spillover effects within the Eurozone economies: A multivariate GARCH approach using the financial stress index
