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Financial Integration and European Tourism Stocks

Author

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  • Guglielmo Maria Caporale
  • Stavroula Yfanti
  • Menelaos Karanasos
  • Jiaying Wu

Abstract

This study examines the macro drivers of the time-varying (dynamic) connectedness between eleven European tourism sectors. Financial integration between the travel and leisure markets, measured by their dynamic correlations or co-movement, is explained by common global fundamentals. The empirical results provide new evidence on the counter-cyclical behaviour of the correlations; in particular, stronger cross-country interdependence can be attributed to economic slowdowns characterized by higher uncertainty and geopolitical risk, tighter credit and liquidity conditions, and sluggish economic and real estate activity. Further, economic and political uncertainty is found to intensify the macro effects on tourism correlations. Finally, crises such as the 2008 financial turmoil, the subsequent European debt crisis, and the recent Covid-19 pandemic crash, also magnify the impact of macro drivers on the evolution of co-movement and integration in the tourism sector.

Suggested Citation

  • Guglielmo Maria Caporale & Stavroula Yfanti & Menelaos Karanasos & Jiaying Wu, 2023. "Financial Integration and European Tourism Stocks," CESifo Working Paper Series 10269, CESifo.
    • Handle: RePEc:ces:ceswps:_10269
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    More about this item

    Keywords

    cross-country tourism correlations; economic policy uncertainty; financial/health crisis; financial integration; sectoral contagion; travel and leisure industry;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Z39 - Other Special Topics - - Tourism Economics - - - Other

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