Intervention Model for Analyzing the Lebanese Tourism Sector

Abstract

This paper investigates changes in the number of tourists who visited Lebanon between 1995 and 2010 and its consequences on the economy. We consider different seasonal autoregressive integrated moving average intervention models in which the interventions take the form of a permanent shock, a temporary shock, or a gradual changing shock. The intervention dates are endogenously determined using Lumsdaine–Papell unit root test with two breaks. Using monthly data from January 1995 to December 2010, we find strong evidence in favor of a stationary process with two structural breaks. The two breaks identified correspond to November 1997 and January 2007, respectively. We also find that the first break is temporary while the second is gradually changing. The number of tourists dropped by 55% in November 1997 which costs the tourism sector a minimum loss of around 19 billion Lebanese Pound. After January 2007, the number of tourists has increased gradually by 0.7%.