Professorial Chair Lecure Don Saniago Syjuco Disinguished Professorial Chair in Economics THE ONRUSH OF KOREAN TOURISTS TO THE PHILIPPINES A MACROECONOMETRIC EVALUATION Dr. Cesar C. Rufino School of Economics
For he las six years in a row, Korea has been he Philippines op inernaional ouris generaing marke, and heir number is monoonically increasing. Avid observers of he Philippine- Korean affairs may wan o answer he quesion Wha can explain he recen phenomenon of Korean naionals coming in droves o he Philippines as ouriss? In order o address his problem, alernaive srucural economeric models of Korea s demand for Philippine ourism are developed, wih a view in idenifying he criical facors ha explain he phenomenon as well as deermining crucial decision-making parameers mos imporan o ourism policy planners.
Theoreical Framework I is our primary conenion ha he level and growh of inernaional ourism are closely aligned o economic, financial, culural and weaher relaed facors. A he micro level, he confluence of hese variables affecs he decision of consumers o underake overseas ravel. Caegories of Demand Deerminans 1. Economic Aciviy indicaors a he source counry (Korea) a. Real Gross Domesic Produc (GDP) of Korea b. Bilaeral Trade Volumes beween Korea and he Philippines 2. Relaive Prices a. Relaive prices a he desinaion counry (Philippines) vis-à-vis a he source counry b. Relaive prices a he alernaive desinaion counry (Thailand) 3. Exchange Rae Facors 4. Seasonaliy Facors
Model Specificaion In consumer demand analysis, he double logarihmic funcional form is regarded as he mos useful algebraic form of relaionship since demand elasiciies can be easily derived from he esimaed parameers. The mos basic model of Korean ourism demand for Philippine ourism can be specified as follows Where, TA = αri RP BT SP u 1 2 β3 4 exp( ) β β β TA represens Korean ouris arrivals during quarer RI = Real Income of Koreans a quarer (Real GDP) RP = Exchange Rae Adjused Relaive Price of Tourism in he Philippines and is defined as RP = ( CPI / CPI ) / RE P K RE = Relaive Exchange Rae a quarer, or Korean Won o one uni of Philippine Peso BT = Exchange Rae Adjused Bilaeral Trade beween Philippines and Korea a quarer SP = Exchange Rae Adjused Relaive Price of Tourism in Subsiue Desinaion (Thailand) * s SP = ( CPI / CPI ) / RE * T K RE = Korean Won o one uni of Thai Bah a quarer
Taking he naural logarihm of model (1) resuls in he double logarihmic demand model (2) wih θ = ln( α) log( TA ) = θ + β log( RI ) + β log( RP ) + β log( BT ) + β log( SP ) + u 1 2 3 4 A-Priori Expecaions: β 1 > 0 (Income Elasiciy of Tourism Demand is posiive) β < (Desinaion Price Elasiciy of Tourism Demand is negaive) 2 0 β > (Bilaeral Trade Elasiciy of Tourism Demand is posiive) 3 0 β > (Subsiue Desinaion Price Elasiciy of Tourism Demand is posiive) 4 0 Daa: Quarerly, Firs Quarer 1995 o Fourh Quarer 2010
Model Specificaion wih Seasonaliy log( TA ) = θ + β log( RI ) + β log( RP ) + β log( BT ) + β log( SP ) 1 2 3 4 + ψ D + ψ D + ψ D + u 1 1 2 2 3 3 Seasonal Inegraion and Coinegraion If here exis uni roos a he quarerly frequency on TA bu no on regressors RI, RP, BT and SP he above specificaion is appropriae (Abeysinghe 1994), oherwise he use of SARIMA noise modeling is appropriae. Coinegraion of he above variables will be esed using he Johansen Trace and Maximum Eigenvalue ess (Johansen 1988). When a unique coinegraing vecor is found, an Error Correcion model can be generaed from he long-run relaionship for use in analysis of shor-run dynamics.
HEGY Seasonal Uni Roo Tes Given { y }, a realizaion of quarerly ourism variable Y, 4 (1 L ) y = + 1D1 + 2D2 + 3D3 + 1y1 1 + 2y2 1 + 3y3 1 + 4y3 2 + α γ γ γ π π π π ε where: y = (1 + L+ L + L ) y = y + y + y + y 2 3 1 1 1 1 2 3 4 y = (1 L+ L L ) y = y y + y y 2 3 2 1 1 1 2 3 4 y = (1 L ) y = y y 2 3 1 1 1 3 y = y y 3 2 2 4 D i = 1 for i =1 s,2 nd,3 rd quarer, zero oherwise (Seasonal Dummies) k L is he lag operaor wih propery L y = y k
HEGY Seasonal Uni Roo Tess Resuls Auxiliary -es for -es for F-es for Variable ( Y ) Regression H o : π 1 = 0 H o : π 2 = 0 Ho : π 3 π 4 = 0 (Zero Freq.) (Bi-annual Freq.) (Annual Freq.) Ln (Korean Arrivals) Wih Inercep & = -1.61002 = -1.82700 F = 9.63719** Seasonal Dummies Ln (Real GDP of Korea) Wih Inercep & = -2.03761 = -2.17018* F = 9.96866** Seasonal Dummies Ln (Exchange Rae Wih Inercep & = -1.62825 = -3.38776** F = 10.07351** Adjused Relaive Seasonal Dummies Prices a Desinaion) Ln (Exchange Rae Wih Inercep & = -1.47626 = -3.04315** F = 13.80161** Adjused Relaive Seasonal Dummies Prices a Alernaive Desinaion) Ln (Bilaeral Trade Wih Inercep & = -1.50485 = -2.79453** F = 8.02343** Volume beween Seasonal Dummies Philippines & Korea, Exchange Rae Adjused) * Significan a 5% level Conclusion: Korean Arrivals series is Seasonal a Quarerly frequency, bu no he oher variables ** Significan a 1% level
Resuls of he Johansen Mulivariae Coinegraion Tess Rank Eigenvalue Trace es p-value λ - max es p-value 0 0.53551 93.710*** [0.0001] 54.444 *** [0.0000] 1 0.25180 39.266 [0.2526] 20.596 [0.3118] 2 0.20171 18.670 [0.5274] 15.995 [0.2343] 3 0.02627 2.6745 [0.9728] 1.8904 [0.9866] 4 0.01098 0.7841 [0.3759] 0.7841 [0.3759] Conclusion: There exiss a unique Coinegraing relaionship among he variables
Esimaed Long Run Model (- values in parenheses) log( TA) = 8.25 + 2.65log( RI ) + 0.46log( RP) + 1.91log( SP) Model Diagnosics: (9.14)*** (1.01) (3.18)*** 0.29log( BT) + 0.086 D 0.191 D 0.023 D 1 2 3 (-2.34)** (1.21) (-2.66)** (-0.32) Ramsey RESET: F = 0.072744 (p-value = 0.7880) Log Lineariy Tes: χ 2 (2) = 3.27415 (p-value = 0.194549) Durbin Wason: DW = 1.42524 (p-value = 0.00316808) Jarque-Bera Residual Normaliy: χ 2 (2) = 0.419 (p-value = 0.81098) ARCH Effec: χ 2 (4) = 8.63676) (p-value = 0.0708486) CUSUM Tes: Harvey-Collier = -2.34984 (p-value = 0.02193) Mean VIF = 8.13225
Alernaive Korean Long-Run Tourism Demand Models Regressors (1) (2) (3) (4) (5) (6) OLS CORC HILU PWE OLS PWE Consan -8.255** -7.216** -7.219** -7.588** -5.563** -6.203** (1.905) (2.605) (2.601) (2.560) (1.701) (2.498) log( RI ) 2.655** 2.251** 2.253** 2.253** 1.990** 1.991** (0.2905) (0.3316) (0.3314) (0.3310) (0.1085) (0.1653) log( RP ) 0.4589 0.7561 0.7551 0.7278 (0.4551) (0.5732) (0.5726) (0.5722) log( SP ) 1.906** 1.354* 1.357* 1.360* 2.206** 2.025** (0.5992) (0.7157) (0.7151) (0.7152) (0.2308) (0.3259) log( BT ) -0.2873** -0.1187-0.1194-0.1029 (0.1228) (0.1324) (0.1324) (0.1310) D 1 0.08561 0.08426 0.08432 0.07812 0.07338 0.06594 (0.07097) (0.05867) (0.05871) (0.05769) (0.07376) (0.05579) D 2-0.1906** -0.2088** -0.2087** -0.2100** -0.2172** -0.2194** (0.07178) (0.06508) (0.06511) (0.06470) (0.07369) (0.06209) D 3-0.02285-0.03222-0.03218-0.03170-0.04175-0.03863 (0.07118) (0.05779) (0.05783) (0.05739) (0.07375) (0.05526) T 72 71 71 72 72 72 2 R 0.8974 0.9042 0.9042 0.9071 0.8886 0.9070 log( L ) 13.76 9.682 Sandard errors in parenheses * indicaes significance a he 10 percen level ** indicaes significance a he 5 percen level *** indicaes significance a he 1 percen level OLS Ordinary Leas Squares CORC Cochrane-Orcu Ieraive GLS Procedure HILU Hildreh-Lu Grid Search GLS Procedure PWE Prais-Winsen GLS Esimaion Procedure GLS Generalized Leas Squares
Final Long Run Tourism Demand Model for Korea (p-values in parenheses) log( TA ) = 6.203 + 1.991log( RI ) + 2.025log( SP) + 0.066 D 0.2194 D 0.0386 D Diagnosics: 1 2 3 (0.0156)*** (2.55e-18)*** (3.94 e-08)*** (0.242) (0.008)*** (0.487) Ramsey RESET: F = 0.252507, (p-value = 0.6170) Log Lineariy Tes: χ 2 (2) = 0.000767055 (p-value = 0.977905) Durbin Wason: DW = 2.107, (p-value = 0.4174) Jarque-Bera Residual Normaliy: χ 2 (2) = 0.962, (p-value =0.61829) ARCH Effec: χ 2 (4) = 2.96012), (p-value = 0.08534) Mean VIF = 1.073 CUSUM Tes: Harvey-Collier = 1.46373 wih p-value 0.1481 ***significan a 1% level
The Shor-Run Error Correcion Model (p-values in parenheses) log( TA ) = 0.004 + 5.07 log( RI ) + 1.07 log( SP ) Diagnosics: (0.00326) (0.05098) 1 2 3 (0.56204) (<0.00001) (0.02142) (<0.00001) 1 + 0.038 D 0.322 D + 0.156 D 0.703 u Ramsey RESET: F(1, 63) = 0.526906 [p-value = 0.470599] Jarque Bera: χ 2 (2) = 8.29825 [p-value = 0.0157782] ARCH Effec: χ 2 (4) = 1.84215 [0.764762] Breusch-Godfrey Auocorrelaion: LMF = 0.125862 [p-value = 0.723946] CUSUM es: Harvey-Collier (63) = -0.224889 [p-value = 0.822793]
Implicaions of he Economeric Resuls There is a unique long run equilibrium Korean ourism demand model whose significan regressors are he Real GDP of Korea and he exchange rae adjused price raio a he subsiue desinaion (Thailand). The price raio a he desinaion, adjused for he effec of exchange rae variaions (which proxies for he cos of living a he desinaion) proved o be inconsequenial, and so wih he exchange rae adjused bilaeral rade of he Philippines and Korea (which represen he economic aciviy of business ravelers). This resuls imply ha Korean ouriss are no price conscious a he desinaion bu are sensiive o price signals from Thailand when hey make heir ravel decisions. The insignificance of he rade variable may imply he crowding ou of business ravelers by pleasure and special ineres groups of Korean ouriss. Tourism demand from he Korean marke is shown o be highly income elasic. The magniudes of boh he long run and shor run income elasiciy of demand of 1.99 and 5.07 respecively accenuae he imporance of Korea s economic performance o he inflow of Korean ouriss o he Philippines; a well performing Korean economy augurs well for he Philippines ourism secor. The long run price elasiciy a he subsiue
desinaion of 2.025 and he corresponding shor run elasiciy of 1.0733 highligh he siff compeiion beween he Philippines and Thailand in aracing Korean ouriss. Wih Korea s Real GDP expeced o grow 2.8% in 2013 from 2.0% in 2012 (Samsung Economic Research Insiue (2013)) and Thailand s inflaion o increase o 3.3 in 2013 from 3.2 in he previous year (Asian Developmen Oulook 2012 Updae (Ocober 2012)), he massive inflows of Korean ouriss o he Philippines will coninue. The sable seasonaliy of Korean ourism o he Philippines as revealed by boh he long run and shor run models indicaes he need for planning in anicipaion of he lean and peak arrival quarers. The significan dip during he second quarer and he spikes in arrivals in he oher quarers may resul in inefficien use of resources if no carefully planned for. The sabiliy of he equilibrium (long run) model may be gleaned from he very high adjusmen speed of 70.26 percen, which implies ha adjusmen o equilibrium occur almos insananeously wihin a quarer.
Breaking News from he Deparmen of Tourism (DOT) As he whole year 2012 daa becomes available, he DOT made his pronouncemen Korea coninues o be he counry s larges visior marke wih 1,031,155 arrivals, accouning for 24.13% share of he oal visior volume of 4,272,811 a new all-ime record. The Korean marke rose by 11.45% from is arrivals of 925,204 in 2011. Anoher record was achieved by he ourism indusry as i is he firs ime ha a source marke of he Philippines reached is one millionh visior. (www.ourism.gov.ph Feb. 2013). As he January 2013 daa becomes available, he DOT made his press release: Philippine ourism was off o a good sar as he counry welcomed 436,079 visiors in January 2013, a 6.09% increase vis-à-vis las year s volume of 411,064 for he same monh. Korea sill remains he leading visior marke wih 134,994 arrivals comprising 30.96% of he oal inbound raffic. The Korean marke grew by 32.13% agains is 2012 arrival of 102,166. This growh is he highes among he op five markes of he counry. (www.ourism.gov.ph March 2013).
Thank You!!!