Global perspective on the permanent or transitory nature of shocks to tourist arrivals: Evidence from new unit root tests with structural breaks and factors

Abstract

This study extends the literature on the permanent or transitory nature of shocks to per capita tourist arrivals along several dimensions. First, the study evaluates the nature of shocks to per capita tourist arrivals for a global panel of 129 countries. Second, unlike previous studies, we jointly estimate structural changes that represent either abrupt breaks or as a Fourier approximation of smooth breaks along with introducing a factor structure to test for the presence of unit roots in per capita tourist arrivals. Third, contrary to previous studies, our results show that rejection of the null hypothesis of a unit root in per capita tourist arrivals is quite limited compared to other unit root tests that fail to account for cross-correlations. Policy implications of the findings are also discussed.