Decomposing a time-frequency relationship between economic policy uncertainty and tourism in the G8 countries through wavelet analysis

This paper aims to examine the relationship between economic policy uncertainty (EPU) and tourism activities in the Group of Eight countries using wavelet transform context structures. This innovative technique allows the decomposition of time-series at different time frequencies. In this work, we used continuous wavelets, wavelet coherency and wavelet phase-difference based on Granger causality analysis to investigate the relationship between EPU and tourism. Results indicate that the relationship is generally negative but changes over time, displaying low to high frequency cycles. Moreover, the timing and frequency change when EPU co-moves with tourism. Accordingly, it can be recommended that the government increase and promote tourism demand and further provide and nurture the expansion of the tourism supply.