Estimating the Output Response to Tourism Spending in the Mediterranean Countries
Estimating the Output Response to Tourism Spending in the Mediterranean Countries

Author(s): Marko Senekovič, Jani Beko
Subject(s): Economy, Tourism
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: Tourism Spending Multiplier; Economic activity; Vector Autoregression Model; Determinants
Summary/Abstract: The aim of this chapter is, first, to assess the impact of changes in tourism spending on economic activity in 16 Mediterranean countries and, second, to examine whether country-specific characteristics affect the size of tourism spending multipliers. Based on aggregate SVAR model estimates, the authors confirmed a statistically significant response of output to the shock in tourism spending in 88% of the analyzed cases at least over the part of the forecast horizon. In 56% of the examined cases, the value of the respective multiplier is above two. The existence of the multiplier mechanism is documented in 13 economies for domestic and foreign tourism spending within a particular forecast horizon. Tourism spending generates stronger GDP growth in countries that record a higher standard of living, have a better state of road and railroad transport infrastructure, and, to some extent, display higher consumer price levels of hotels and restaurants.

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