Causality between European Economic Policy Uncertainty and Tourism Using Wavelet-Based Approaches

Abstract

This article aims to examine the link between European economic policy uncertainty (EPU) and tourism activities in Portugal, Ireland, Italy, Greece, and Spain using wavelet transform context structures. This innovative technique allows the decomposition of time-series at different time frequencies. In this work, we used continuous wavelets, wavelet coherency, and wavelet phase difference based on Granger causality analysis to investigate the relationship between European EPU and tourism using the annual data from 1995 to 2015. The results indicate that there is a unidirectional causal influence of European EPU on international tourism receipts (ITR) in the short run and a bidirectional causal influence of European EPU on ITR in European countries in the long run. Accordingly, it can be recommended that the government needs to increase and promote tourism demand and to further provide and nurture the expansion of tourism supply.