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Purpose This paper aims to investigate prosperity–international tourism expenditure nexus to discover the prosperity sub-indices which affect tourism expenditure. Design/methodology/approach Using annual panel data for the sample period between 2009-2013 on 98 countries, this study implements a two-stage least squares estimation method with fixed effects specification in a panel regression analysis to find the relationships between international tourism expenditure and prosperity sub-indices. Findings The estimation results reveal a statistically significant relationship between the tourism expenditures of the citizens and prosperity, when prosperity is measured using its sub-indices, including Entrepreneurship and Opportunities, Government Efficiency, Education, Health, Safety and Security, Personal Freedom, Social Capital and Economy of the country. Education, Safety and Security and Health are the most significant factors which affect tourism expenditures of the country of origin. Practical implications To decrease the money outflow, policymakers may have plans to improve health infrastructure and, at the same time, increase quality of education and access to education in the country. Tourism policies which do not consider these prosperity sub-indices as explanatory variables may make mistakes in controlling actual tourism expenditures. Originality/value The paper’s originality lies in using new independent variables (prosperity sub-indices) in estimating tourism expenditure by using an appropriate panel data approach that deals with endogeneity problems.

PurposeIn spite of the certain risk imposed by financial stress on the real economy, the relationship between financial stress and economic activity is complicated and underresearched, meaning that important gaps still remain in the authors’ understanding of this critical relationship. Therefore, the current study aims to answer the significant question regarding whether a stressful financial sector has predictive power on the real sector and vice versa. Hence, the study examines the causal interrelationship between financial stress index (FSI) and economic activity in Luxembourg as a sample country.Design/methodology/approachIn this study, accompanying the time domain Granger causality framework of Hacker and Hatemi-J (2012), the authors utilize the spectral causality technique of Breitung and Candelon (2006), which is based on the study of Geweke (1982) and Hosoya (1991). This method enables the researcher to measure the degree of a particular variation in time series. Moreover, it allows considering the nonlinearities and causality cycles. The authors further apply the recent method of Farné and Montanari (2018) that is a bootstrap framework on Granger-causality spectra, which allows for disambiguation in causalities.FindingsThe time-domain approach finds evidence of bidirectional causation between the variables. However, the spectral causality results indicate the causal linkages between the series are only valid under the medium-run frequency. This study’s findings emphasize covering the frequency causality to deliver a more comprehensive picture of the interrelationship between the variables.Originality/valueThere are many studies in this area that examine the nexus between financial stress and economic activity. However, the authors believe this paper is the first study in the context of Luxemburg. The authors focus on this country since its financial sector is designated as the most important pillar for the economy. Thus, a careful and reliable examination of the relationship between the financial sector and economic activity is likely to be of considerable interest to policymakers and researchers in this field.

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