The time–frequency causal effect of COVID-19 outbreaks on the tourism sector: evidence from the European zone

ABSTRACT

This study examines the time–frequency causal effect of the novel coronavirus (COVID-19) pandemic on the European tourism sector. To do that, we use the wavelet coherence and phase difference framework, which enables us to investigate the causal interplays and business cyclical co-movement between COVID-19 crisis and the European tourism sector at several investment horizons. Our main results are as follows. First, the COVID-19 outbreaks significantly and highly affected the European tourism sector. Second, mid- and long-term causal effects of the recent outbreaks are greater than the effects on the short-term horizon. Third, the transmission channel from COVID-19 crisis to the European tourism sector decreases slowly as wavelet scales increase. Further, our empirical findings afford various policy implications to investors and tourism actors.

KEYWORDS:

• COVID-19 pandemic
• tourism sector
• wavelet coherence
• causality

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 As stated in Daubechies (1992), the basis wavelet function ${\psi }_{a,b}\left(t\right)$ should fulfill the following conditions in order to be a mother wavelet. (i) $\underset{-\mathrm{\infty }}{\overset{+\mathrm{\infty }}{\int }}{\psi }_{a,b}\left(t\right)dt=0$ (zero mean), (ii) $\underset{-\mathrm{\infty }}{\overset{+\mathrm{\infty }}{\int }}{\psi }_{a,b}^2\left(t\right)dt=1$ (unit variance), which indicates that the wavelet is limit on a period of time. (iii) $0\prec C_{\varphi }=\underset{0}{\overset{+\mathrm{\infty }}{\int }}{\displaystyle \frac{\left|\tilde{\psi }\left(f\right)\right|}{f}df\prec +\mathrm{\infty }}$ (the admissibility condition), $\tilde{\psi }\left(f\right)$is the Fourier transform of $\psi \left(t\right)$.