ARE SHOCKS IN THE TOURISM OF V4 COUNTRIES PERMANENT?

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1 ARE SHOCKS IN THE TOURISM OF V4 COUNTRIES PERMANENT? Šefan Lyócsa Eva Liavcová Pera Vašaničová Absrac We sudy he persisence properies of seasonally adjused number of nighs spen (NNS) in four Cenral and Easern European Counries (CEE): Poland, Czech Republic, Slovakia, and Hungary. If he resuling ime series show presence of a uni-roo, i has far reaching consequences for ourism policy making, as shocks (policies) can have permanen effecs on he ourism. For ha purpose we es he seasonally adjused ime-series for he presence of a uni roo, hrough he KPSS saionary es wih wo breaks using monhly daa from 003 o 015, and allowing for he presence of deerminisic srucural breaks. We show, ha aking accoun srucural breaks in ime-series of ourism aciviy migh be crucial when deciding wheher he series is saionary or no. Firs, our resuls have suggesed, ha he firs breaks occurred around he financial crisis in 008 and 009 (excep Slovak Republic). The second break in he series occurred laer, afer he economies sared o make a fas recovery. Second, when srucural breaks were no aken ino accoun, we found ha each of he ourism aciviies appears o be non-saionary. Key words: ourism, nighs spen, Cenral and Easern Europe, saionariy, srucural breaks JEL Code: C3, Z3 Inroducion In he presen paper, we are exploring wheher nighs spen, a key variable measuring he overall ourism aciviy, appear o be saionary or non-saionary. Our goal is o answer a simple, ye imporan quesion. Will policies, oriened owards ourism aciviy have only shor-erm effecs? If we find evidence, ha he resuling series are non-saionary, i will have far reaching consequences as i will imply ha ourism policies migh have permanen effec on he economy of ourism in a given counry. Using a variey of models based on fracional inegraion and seasonal auoregressions Assaf e al. (011) examined wheher inernaional monhly ouris arrivals o Ausralia are persisen. Their resuls showed ha boh, shocks affecing he seasonal srucure of 1091

2 Ausralian ourism arrivals and shocks relaed o he long run evoluion of he Ausralian ourism arrivals will have a ransiory effec, alhough compared o he laer, he former ime series shows higher persisence (longer mean reversion). In a similar sudy, Gil-Alana (011) examined ourism in Souh Africa. The resuls indicaed ha he eigh series examined are all mean revering, implying ha shocks have ransiory hough long-lasing effecs. Gil-Alana, e al. (015) measured persisence in Croaian ourism using foreign ouris arrivals and overnigh says for seven Croaian coasal counies from January 1998 o December 013. The resuls revealed ha ourism indicaors exhibi seasonal uni roos which require seasonal firs differences o render he respecive ime series saionary. A number of oher sudies provided furher inconclusive resuls. For example Andraz and Rodrigues (009) sudied he persisence of ourism inflows from he UK, Germany, he Neherlands, Ireland, Porugal and Spain in Porugal. Saionariy of ouris arrivals in Singapore was sudied in Lee (009). The ess provide evidence of saionariy for nine ou of welve source counries. The resuls in Tan and Tan (014) indicaed ha he ouris arrivals o Singapore are saionary wih muliple srucural breaks, implying any shocks will have only a ransiory effec. Lim and Pan (005) sudied inbound ourism developmen in China. Apar from oher resuls, hey presened evidence, ha arrivals from Japan o China are non-saionary. The remainder of he paper is srucured as follows. Secion 1 presens he daa. Secion describes he mehodology. Secion 3 discusses resuls and Secion 4 concludes. 1 Daa In our empirical sudy, we es he saionariy hypohesis of nighs spen a ouris accommodaion esablishmens (such as: hoels, holiday and oher shor-say accommodaion, camping grounds, recreaional vehicle park and railer parks) by residens and non- residens (oal) in V4 counries, namely: Slovakia (SK), Czech Republic (CZ), Poland (PL) and Hungary (HU). Daa wih monhly frequency were obained from Eurosa and sar in January 003 while end in December 015. Due o he significan seasonal paern in he daa, we have firs removed he seasonal componen, by using a simple annualizaion principle, i.e. we summed observaions over he pas welve monhs. To be more specific, our firs observaion corresponds o he December 003 and i is he sum of oal monhly nighs spen from January 003 o December

3 Nex observaion corresponds o January 004 and corresponds o he sum of oal monhly nighs spen from February 003 o January 004, ec. Alhough his approach ensures ha a known 1 monh seasonal paern is removed, we have inroduced significan auocorrelaion ino our ime series. However, he levels of auocorrelaion are comparable across oher macro-economic ime series, which are ofen sudied for he presence of non-saionariy. Mehodology.1 The KPSS saionary es wih wo breaks We follow Carrion-i-Silvesre and Sansó (007), who proposed a Kwiakowski e al. (199) ype es wih wo breaks. Le denoe y as our series of ineres. The es is performed by selecing a suiable deerminisic componen μ(.) of y, and esimaing he resuling model via OLS: y. v where v are error erms. The es saisics is given by: T m T 1 i1 v where m denoes he seleced deerminisic funcion, T is he number of observaions, v denoes he esimaed residuals, and (1) () is he long-run variance. Based on heir previous work (Carrion-i-Silvesre and Sansó, 006), Carrion-i-Silvesre and Sansó (007) have proposed o esimae he long-run variance via he boundary rule of Sul e al. (005). Firs, he esimaed residuals are fied wih an auoregressive model: v 1v 1... pv p (3) where p denoes he lag order. In our empirical applicaion, we esed for differen values of p = 1, up unil he resuling residuals auocorrelaion up o he 5 h were no showing presence of order. For ha purpose, we have uilized he Peña and Rodríguez (006) es wih Mone Carlo criical values (see Lin and McLeod, 006). Our iniial esimaor of he long-run variance was calculaed as: T l T 1 1 T T k s M 1 s1 s1 QS, s (4) where k QS is he Quadraic Specral kernel weighing scheme wih bandwidh parameer M. The value of he bandwidh parameer was chosen based on he Newey and Wes (1994) bandwidh auomaic procedure. The long-run variance in (4) is recolored o: 1093

4 * 1 where 1 is he auoregressive polynomial from (3) evaluaed a 1. The boundary condiion proposed in Sul e al. (005), leads o he final esimae of he long-run variance employed in he es saisic: min T, * Finally, we should specify he deerminisic componen μ(.). We follow Carrion-i- Silvesre and Sansó (007) and consider he following seven model specificaions: (5) (6) Tab. 1: Deerminisic funcions Model AAN AA BB CC μ(.) DU 0 i1 i i, DU 0 0 i1 i i, DT 0 0 i1 i i, DU DT 0 0 i1 i i, i1 i i, DU DT AB-BA ,, AC-CA BC-CB Source: based on Carrion-i-Silvesre and Sansó (007) DU DT 0 0 i1 i i,, DU DT 0 0, i1 i i, where DU i, = 1 and DT i, = ( T bi ) if > T bi and 0 oherwise, where T bi denoes he dae of he break in he deerminisic componen, i = 1,, and T b1 T b ± 1. The criical values of he saionariy es were used from Carrion-i-Silvesre and Sansó (007), who used an exensive Mone Carlo simulaion o approximae asympoic criical values. I is worh noing, ha he criical values depend on he locaion of he break daes.. Esimaion of he breaks and model selecion The break daes were esimaed using he RSS (residual sum of squares) minimizaion algorihm. The selecion of he preferred specificaion was performed using he Modified Bayesian Informaion Crierion (MBIC) as proposed by Hall e al. (013). More specifically, 1094

5 we seleced (and repored) model wih a specificaion for which he following value was he lowes: 1 MBIC ln RSS q n 1 3n ln T T (7) m m where q is he number of model parameers, and n is he number of breaks. 3 Resuls The ourism aciviies wih esimaed srucural breaks are ploed in Figure 1 and we can clearly see ha for several series, srucural breaks in he series are evidence. For all bu Slovakia, he dae of he firs srucural break occurred in 008 and 009, i.e. around he period when he financial crisis sared o hi he real economies. From Figure 1 i appears ha aking ino accoun srucural breaks migh be a correc approach for esing saionariy. Fig. 1: Toal nighs spend (de-seasonalized values wih base a December 003) Source: Auhor s own calculaions in R Noes: Verical lines correspond o break daes. Our resuls repored in Table provide srong evidence, ha if we do no ake srucural breaks ino accoun, ourism aciviy across V4 counries appear o be nonsaionary. This is already an ineresing finding, as mos of he empirical sudies are using his ype of no-break saionariy ess. However, if we ake srucural breaks ino accoun, he evidence for non-saionariy is weaker. The resuls for he Czech Republic and Hungary sill sugges non-saionary. The resuls for Slovakia and Poland sugges ha if we ake srucural breaks ino accoun, he series migh be saionary afer all. 1095

6 Tab. : KPSS es saisics wih up o wo srucural breaks (nighs spen) Counry No break models Breaks models Level Level + Trend Level Trend Model Tes Tes Tes Break 1 Break Break 1 Break MBIC CZ c 3.66 c BB b March 008 March HU 33.6 c 3.91 c ACCA a Apr. 009 July 01 July PL c BB 0.09 Oc. 008 Jan SK c BCCB Feb. 005 July Source: Auhor s own calculaions in R Noe: Subscrips a, b and c denoe saisical significance a he 10%, 5% and 1% significance level. MBIC denoes he modified Bayesian Informaion Crierion. Conclusion We show, ha aking accoun srucural breaks in ime-series of ourism aciviy migh be crucial when deciding wheher he series is saionary or no. Firs, our resuls have suggesed, ha he firs breaks occurred around he financial crisis in 008 and 009 (excep Slovak Republic). The second break in he series occurred laer, afer he economies sared o make a fas recovery. However, he breaks occurred in differen years, which sugges, ha ourism aciviy in he region recovered wih differen pace. Second, when srucural breaks were no aken ino accoun, we found ha each of he ourism aciviies appears o be non-saionary. Thus policies migh have permanen effecs on he ourism aciviy in hese economies. However, when we ook srucural breaks ino accoun, he saionariy hypohesis was no rejeced for Poland and Slovakia, where i appears, ha policies (shocks) are ransiory, i.e. are revering o he long-run rends. Acknowledgmen Suppored by he gran No. 1/039/15 of he Slovak Gran Agency and by he gran KEGA 037PU-4/014 of he Culural and Educaional Gran Agency of he Slovak Republic. References Andraz, J. M., & Rodrigues, P. M. (010). Persisence change in ourism daa. Tourism Economics, 16(),

7 Assaf, A. G., Barros, C. P., & Gil-Alana, L. A. (010). Persisence in he Shor- and Long- Term Touris Arrivals o Ausralia. Journal of Travel Research, 50(), Carrion-i-Silvesre, J. L., & Sansó, A. (007). The KPSS es wih wo srucural breaks. Spanish Economic Review, 9(), Carrion-i-Silvesre, J. L., & Sansó, A. (006). A guide o he compuaion of saionariy ess. Empirical Economics, 31(), Gil-Alana, L. A. (011). Tourism in Souh Africa-ime series persisence and he naure of he shocks: Are hey ransiory or permanen?. African Journal of Business Managemen, 5(1), Gil-Alana, L. A., Mervar, A., & Payne, J. E. (015). Measuring persisence in Croaian ourism: evidence from he Adriaic region. Applied Economics, 47(46), Hall, A. R., Osborn, D. R., & Sakkas, N. (013). Inference on Srucural Breaks using Informaion Crieria. The Mancheser School, 81(S3), Kwiakowski, D., Phillips, P. C., Schmid, P., & Shin, Y. (199). Tesing he null hypohesis of saionariy agains he alernaive of a uni roo: How sure are we ha economic ime series have a uni roo? Journal of Economerics, 54(1), Lee, C. G. (009). Are Touris Arrivals Saionary? Evidence from Singapore. Inernaional Journal of Tourism Research, 11(4), Lim, C., & Pan, G. W. (005). Inbound ourism developmens and paerns in China. Mahemaics and Compuers in Simulaion, 66(5), Lin, J. W., & McLeod, A. I. (006). Improved Peňa Rodriguez pormaneau es. Compuaional Saisics & Daa Analysis, 51(3), Newey, W. K., & Wes, K. D. (1994). Auomaic Lag Selecion in Covariance Marix Esimaion. The Review of Economic Sudies, 61(4), Peña, D., & Rodríguez, J. (006). The log of he deerminan of he auocorrelaion marix for esing goodness of fi in ime series. Journal of Saisical Planning and Inference, 136(8), Sul, D., Phillips, P. C. B., & Choi, C. Y. (005). Prewhiening Bias in HAC Esimaion. Oxford Bullein of Economics and Saisics, 67(4), Tan, S.-H., & Tan, S.-K. (014). Are shocks o Singapore's ouris arrivals permanen or ransiory? An applicaion of saionariy eswih srucural breaks. Curren Issues in Tourism, 17(6),

8 Conac doc. Ing. Šefan Lyócsa, PhD. Universiy of Economics in Braislava, Insiue of Economics and Managemen Dolnozemská cesa 1, Braislava, Slovakia Universiy of Presov, Faculy of Managemen Konšanínova 16, Prešov, Slovakia doc. Mgr. Eva Liavcová, PhD. Universiy of Presov, Faculy of Managemen Konšanínova 16, Prešov, Slovakia Mgr. Pera Vašaničová Universiy of Presov, Faculy of Managemen Konšanínova 16, Prešov, Slovakia 1098