Abstract
The fluctuation of oil price tends to have adverse effect on the tourism industry of a nation. This paper investigates the dynamic changes of the inbound tourism market for Fiji and the driving forces of the Fijian tourism cycle. A set of fundamental determinants of tourism demand including international crude oil price has been utilized to predict the Fijian tourism cycle for the period of 2000-2017. The Markov regime-switching model identifies two distinct phases of the Fijian tourism cycle which are an expansion and a recession period. The filtered and smoothed probabilities signalled the Fijian tourism development significantly with the transition probabilities supported. The adequate dating evaluation can offer essential information for policymakers, tourism industry players and even the community in decision making for Fijian tourism to enhance the nation's development. Keywords: Markov-switching model, Fijian tourism cycle, Oil price fluctuation, ForecastingJEL Classifications: Z32; O01; E32DOI: https://doi.org/10.32479/ijeep.8087
Highlights
With the evolution in airline and travel industries, international tourism has developed into one of the leading industries with rapid growth globally
All the variables are significant at 1% level with foreign direct investment (FDI), political stability index (PSI), visitor exports (VE) and gross domestic product (GDP) reacting positively towards TA, except for WTI
For the empirical results obtained for the recession state of regime 2, the crude oil price is inconsistent with the previous results with its positively estimated coefficient
Summary
With the evolution in airline and travel industries, international tourism has developed into one of the leading industries with rapid growth globally. Tourism is able to stimulate the nation’s development when the tourism interests involve the local communities, indigenous people, industry authorities and government collectively. With this broad spectrum across a country, sustainable tourism can be practised when equilibrium can be strike between limits and usages of the natural resources. UNWTO reported that international tourism has shown sustainable growth for the past 8 years. This is further supported by the tourism honoured as the world’s third largest export category with a total export of US$ 4 billion per day on average from international tourism. Tourism demand is vital to be anticipated with the significant determinants that are influential towards the development of Fijian tourism market
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