—The purpose of the paper is to investigate how
inflation have altered the contribution of innovation to the
tourism demand to the European countries during the last few
decades. A hypothesis is proposed to prove that innovation of
highly innovative countries in promoting their tourism industry.
In addition, it is to assess how this relationship has been altered
by the costs of inflation in the countries. Based on the recent
Global Innovation Index (GII), 14 European countries are
chosen as sample, while these countries have been incurring the
inflation over the sample period, 1988-2010. A fixed-effect panel
data framework is estimated with the Feasible Generalized
Least Squares method with bias correction. The study utilizes
innovation indicator to access the impact of costs on innovation
to the tourism sector. To ensure robustness of estimation, the
study focuses on the sensitivity of estimation with respects to the
time lag by estimating the models with sufficient number of
time lag, while also ensuring the sufficient degree of freedom for
the estimation. The result supports the hypothesis that the
countries have increasingly stronger position of innovation to
the tourism industry and this benefit is not altered by the
inflation pressure occurred in the countries.
—Costs, inflation, innovation, tourism demand.
Enn-Lun Yong is with the School of Science and Technology, Universiti
Malaysia, Kota Kinabalu, Sabah, CO 88400 Malaysia (e-mail:
Cite:Enn-Lun Yong, "Innovation, Tourism Demand and Inflation: Evidence from
14 European Countries," Journal of Economics, Business and Management vol. 2, no. 3, pp. 191-195, 2014.