Dependence Structure between Tourist Arrivals of Inbound Tourism Markets inSouth Korea

Abstract

Tourism demand is severely affected by unpredicted events. The purpose of this study was to investigate if non-linear dependence structures exist between tourist flows into South Korea from five major source countries, as South Korea has undergone fluctuations in tourist arrivals due to diverse circumstances and has complex relations with tourism source countries. Additionally, the study examines the structures of extreme tail dependence, which is indicated in the case of unexpected events, and identifies how co-movements vary over time through dynamic copula-GARCH (Generalized Autoregressive Conditional Heteroskedasticity) tests. The copula estimations indicate significant dependencies among all market pairs as well as the strongest dependence between China and Taiwan. Moreover, extreme tail dependence structures show co-movements for four pairs of tourism markets in only negative shocks, for five pairs in both positive and negative conditions, but no co-movement in the China-Taiwan pair. Finally, the dynamic dependence structures reveal that the China-Taiwan dependence is higher than the other time-varying dependence structures, implying that the two markets complement each other.