Examining the business cycle of the tourism industry in Mexico at the state level using the Markov Switching Model (1992 to 2017)

Abstract

Despite being a popular tourist destination, state-level research on the business cycle in Mexico's tourism industry is lacking. This study aims to answer three research questions: Are the growth stages of the international tourism market similar across states? Are the growth stages of the domestic tourism market similar among entities? Is there a relation between the economic cycle of the international tourism market and the domestic market? We use the Markov Switching Model to estimate the business cycle of the tourism industry in each Mexican state from 1992 to 2017. We identify the most attractive states for international and domestic tourists. Notably, eleven of the coefficients belong to the economic cycle of the foreign tourist market, indicating a greater economic impact compared to the domestic market. The results show that each state has its own business cycle, requiring individual projections for each market. This information is relevant for tourism planners and policymakers to address the challenges posed by the SDGs.