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Local tourism cycle and external business cycle

Author

Listed:
  • Gu, Xinhua
  • Wu, Jie
  • Guo, Haizhen
  • Li, Guoqiang

Abstract

This paper uses a Markov switching model (MSM) to decompose Macao’s tourism cycle into high and low growth states (HGS, LGS) for the period of 2005Q2–2017Q2. The likelihood of the cycle maintaining HGS is 93% but the risk of staying in LGS is 80%. The Macao cycle is favorably asymmetric, with HGS (14.7 quarters) lasting much longer than LGS (5.1 quarters). Further, the paper combines structural regressions with the MSM to identify determinants of the Macao cycle, with useful policy implications derived from the regression results. We find that Macao’s tourism cycle is heavily affected by Mainland China’s business cycle and other external factors. Additionally, outward-looking marketing, albeit very costly, is found to be effective for keeping the local cycle in HGS.

Suggested Citation

  • Gu, Xinhua & Wu, Jie & Guo, Haizhen & Li, Guoqiang, 2018. "Local tourism cycle and external business cycle," Annals of Tourism Research, Elsevier, vol. 73(C), pages 159-170.
    • Handle: RePEc:eee:anture:v:73:y:2018:i:c:p:159-170
    DOI: 10.1016/j.annals.2018.06.007
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    2. Xiang Lin & Martin Thomas Falk, 2022. "Nordic stock market performance of the travel and leisure industry during the first wave of Covid-19 pandemic," Tourism Economics, , vol. 28(5), pages 1240-1257, August.
    3. Chaoqun Chen & Yonghong Zhou, 2021. "Institutional endowment, curse, and the impact of external political shock: The case of Macao," Review of Development Economics, Wiley Blackwell, vol. 25(4), pages 2433-2453, November.
    4. Seuk Wai Phoong & Seuk Yen Phoong & Shi Ling Khek, 2022. "Systematic Literature Review With Bibliometric Analysis on Markov Switching Model: Methods and Applications," SAGE Open, , vol. 12(2), pages 21582440221, April.
    5. Chien-Chiang Lee & Godwin O Olasehinde-Williams & Ifedolapo Olabisi Olanipekun, 2022. "GDP volatility implication of tourism volatility in South Africa: A time-varying approach," Tourism Economics, , vol. 28(2), pages 435-450, March.
    6. Kožić Ivan & Arčabić Vladimir & Sever Ivan, 2022. "Tourism and Business Cycles: Does the Relationship Fade Away?," Zagreb International Review of Economics and Business, Sciendo, vol. 25(1), pages 95-110.
    7. Emoto, Masakazu & Sunakawa, Takeki, 2021. "Applying the explicit aggregation algorithm to heterogeneous agent models in continuous time," Economics Letters, Elsevier, vol. 206(C).
    8. Xianke Li & Johnny Fat Iam Lam & Zhicong Lin & Chongyan Li, 2024. "Development Path of Macao Tourism Symbiosis Integration from the Configuration Perspective," Sustainability, MDPI, vol. 16(19), pages 1-16, September.

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