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Modeling and forecasting monthly tourist arrivals in Aruba since the COVID-19 pandemic

By on November 11, 2022 0

Modeling and forecasting monthly tourist arrivals in Aruba since the COVID-19 pandemic

Author/Editor:

Olga Bespalova



Publication date:

November 11, 2022

Electronic access:

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Disclaimer: IMF Working Papers describe ongoing research by the author(s) and are published to elicit comment and encourage debate. The opinions expressed in IMF Working Papers are those of the authors and do not necessarily represent the views of the IMF, its Board of Directors, or IMF management.


Summary:

This paper improves short-term forecasting models of monthly tourist arrivals by estimating and evaluating a time series model with exogenous regressors (ARIMA-X) using the case of Aruba, a small tourism-dependent open economy. Given the importance of the US market to Aruba, it studies the informational value of Google searches originating from the US, the flight capacity utilization of US air carriers, and the per capita demand of US consumers, considering the stock market volatility index (VIX) . It gives several insights. First, flight capacity is the best variable to account for travel restrictions during the pandemic. Second, real personal consumption expenditure in the United States becomes a more important predictor than income, as the former impact of COVID-19 restrictions on consumer behavior was better reflected, while income boosted by support pandemic budget was not entirely expenditure oriented. Third, the correction at the origin improves the model during the estimation period. Finally, the pandemic has changed the econometric relationships between tourist arrivals and their main determinants, as well as the accuracy of forecasting models. Going forward, analysts should re-estimate the models. Out-of-sample forecasts with 5% confidence intervals are produced for the next 18 months.