The Economics of Tourism and Sustainable Development

The Economics of Tourism and Sustainable Development

The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development

Edited by Alessandro Lanza, Anil Markandya and Francesco Pigliaru

Although economics has increasingly become a technical subject, this accessible book aims to present important economics results and relate them explicitly to the policy debate. Using a coherent analytical framework, this unique approach offers prescriptions for moving tourism, and economic development more generally, closer to a sustainable ideal. The authors begin by studying the macroeconomic effect of tourism in terms of growth performance and sources of growth. They also examine how the tourism–growth link is affected by the role of imports in the economy, and how tourism impacts upon land use. Further chapters investigate the important issue of forecasting visitor numbers and explore the need for a comprehensive accounting framework to take account of ecologically sustainable tourism. The authors also examine the microeconomic aspects of sustainable tourism and analyse the increasing popularity of environmentally friendly holidays.

Chapter 2: Forecasting international tourism demand and uncertainty for Barbados, Cyprus and Fiji

Felix Chan, Suhejla Hoti and Michael McAleer

Subjects: development studies, tourism, economics and finance, environmental economics, environment, environmental economics, tourism, geography, tourism


Felix Chan, Suhejla Hoti, Michael McAleer and Riaz Shareef 1. INTRODUCTION Volatility in monthly international tourist arrivals is the squared deviation from the mean monthly international tourist arrivals, and is widely used as a measure of risk or uncertainty. Monthly international tourist arrivals to each of the three Small Island Tourism Economies (SITEs) analysed in this chapter, namely Barbados, Cyprus and Fiji, exhibit distinct patterns and positive trends. However, monthly international tourist arrivals for some SITEs have increased rapidly for extended periods, and stabilized thereafter. Most importantly, there have been increasing variations in monthly international tourist arrivals in SITEs for extended periods, with subsequently dampened variations. Such fluctuating variations in monthly international tourist arrivals, which vary over time, are regarded as the conditional volatility in tourist arrivals, and can be modelled using financial econometric time series techniques. Fluctuating variations, or conditional volatility, in international monthly tourist arrivals are typically associated with unanticipated events. There are time-varying effects related to SITEs, such as natural disasters, ethnic conflicts, crime, the threat of terrorism, and business cycles in tourist source countries, among many others, which can cause variations in monthly international tourist arrivals. Owing to the nature of these events, recovery from variations in tourist arrivals from unanticipated events may take longer for some countries than for others. These time-varying effects may not necessarily exist within SITEs, and hence may be intrinsic to the tourist source countries. In this chapter, we show how the generalized autoregressive conditional heteroscedasticity (GARCH) model...

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