New tourism financial condition index: extended with terrorist attacks

Abstract

Purpose- In this study, a composite indicator that can be followed in the financial markets has been developed. The tourism financial conditions index has been developed in the literature for tourism based on MCI (Monetary Conditions Index) and FCI (Financial Conditions Index). The index is called the Tourism Financial Conditions Index in their studies. This study ensures that the calculation of the tourism index by adding the terror variable to the index can better reflect the expectations. Methodology- While constructing the composite indicator Z-score is used for standardization. With this standardization terrorist attacks variable is added to the composite indicator. The relationship between New Tourism Financial Composite Indicator and Tourism Stock Market Index Return is analyzed with the Threshold VAR method. This method is used because of the nonlinearity of variables. Findings: Monthly data for the period 2009:07 – 2017:12 were used in the study. The countries examined are Australia, Denmark, France, Italy, Spain, Türkiye and the UK. It is aimed to examine the relationship between the calculated NTFCI and the Tourism Stock Exchange data of each country. T-VAR results show the relationship between these variables. Conclusion - In this study, the new version of the TFCI index with terrorist incidents is presented. Chang (2015) developed the TFCI index for the tourism sector. We think that the countries should also consider the effect of terrorism in their economic and financial research in tourism area. Based on this idea, the index was expanded by adding the terror variable to the previously developed TFCI composite indicator and its relationship with the tourism stock market index as a financial indicator was examined. The TVAR model is applied which shows the short-term dynamic relationship. Models for different countries were estimated and similar results were obtained for different countries. Keywords: Tourism financial conditions index, tourism sector, monetary conditions index, financial conditions index JEL Codes: E44, E47, G32