Origin Region Wealth Effect and Inbound Tourism to Europe : Evidence from Stock Market Indices

Using 43 European countries over the period 1994-2019, we demonstrate that demand side wealth effect as inferred from the Morgan Stanley Capital International (MSCI) indexes is an important determinant of inbound tourism. We find that a good financial mood as inferred from a bullish wealth effect positively influences the inflow of tourists to Europe. Our results are consistent despite the introduction of macroeconomic factors. The effect of the relationship between MSCI World, MSCI USA and MSCI Europe (external wealth effect) is higher for non-EU member countries and countries in Eastern Europe. The findings confirm the view that the regional wealth effect is an important indicator of the regional influx of tourists. The results also indicate that a boom in the European stock market positively impacts the inflow of tourists from all over the world. Lastly, we find that MSCI USA (USA wealth effect) was an important factor in predicting inbound tourism during the Global Financial Crisis