THE IMPACT OF OIL PRICE INNOVATIONS ON THE RELATIONSHIP BETWEEN TOURISM AND ECONOMIC GROWTH: A STRUCTURAL VECTOR AUTOREGRESSIVE APPROACH FOR EUROMED COUNTRIES

There is a wealth of literature on the interrelationship between tourism income and economic growth. This relationship, however, is rarely examined under the prism of an exogenous shock. As such, the current study is focused on the effects of oil price innovations on the tourism-led-economic-growth hypothesis (economic growth is approximated by industrial production). Furthermore, these effects are filtered through inflation and stock market volatility. The latter is used as an approximation of economic uncertainty which is caused by oil price turbulence. To this end, we develop a Structural Vector Auto-Regressive (SVAR) model using monthly data from 1995 until 2010 for five Mediterranean countries, namely, France, Greece, Italy, Portugal and Spain. Our results indicate that tourism income is having a significant effect on industrial production; although, the reverse is not true. Finally, both tourism income and industrial production are affected by oil price innovations and economic uncertainty.