Assessing the impact of domestic economic crises on foreign travel data recording : the Greek case

Abstract

Purpose: We assess whether statistical recording of international travel activity towards a country in financial crisis environment underestimates the actual picture of its tourism receipts. Design/Methodology/Approach: Considering the case of Greece and using data during a period including the financial crisis, a VECM estimation highlights the factors endogenously affecting the recorded international travel receipts. Findings: The performance of international travel receipts during the Greek crisis cannot be explained only by changes in variables proposed in the appropriate theoretical background like foreign demand and relative prices. In addition, inward travel activity in the country has been adversely affected by the rise in domestic turmoil following the crisis, while travel receipts indicators underestimate actual tourism performance during periods of intense turbulence in the financial system. Practical Implications: Accounting for such under recording, policy makers can more accurately assess the performance and actual contribution of the tourism sector to an economy under stress, upon designing the appropriate sectoral policy interventions. In parallel, tourism sector stakeholders can form a better-informed view about the sector’s actual trends and prospects. Originality/Value: In the case of the Greek financial crisis we find that the effective income contribution of the tourism sector to Greek service providers was considerably higher than recorded international receipts, by circa 4.6% of annual revenues and cumulatively by €2.8 billion during the four-year period following the imposition of capital controls.