dynamics, persistence and impact

This study presents an empirical evaluation of the impact of tourism on the Portuguese economy. We use a two-step FAVAR with a ve principal component estimation to nest the e ect of tourism in other 127 macroeconomic variables. Our ndings point to some channels in which tourism can help an economy develop and recover from a crisis. The overall e ect on the variables is positive, but the most prominent dynamics concern the labour market. The variance decomposition, with an R2 ranging from 29.7% to 89.0%, is more robust in indicators such as Unemployment (14.0%) and Industrial Employment Index (18.3%). It also accounts for 3.7% of the overall Economic Sentiment Indicator, showing improvements in economic agents' expectations. Finally, the representation of tourism shocks along time backs the hypothesis of tourism helping the Portuguese economy in recovering from a nancial crisi