Brexit uncertainty and volatility persistence in tourism demand
Brexit uncertainty and volatility persistence in tourism demand
Tourism has emerged as one of the leading components of aggregate economic growth in most developed economies, especially in the UK, where it is predicted to grow at an annual rate of 3.8% through 2025. Because tourism demand represents individuals’ choice between leisure and work, a persistence of negative shocks, such as Brexit uncertainty, can be detrimental to the growth of tourism via its impact on agents’ utility function of a directed consumption of leisure for a specific country. This note fills a gap in the literature by providing an econometric estimate of time-varying volatility in tourism demand following Brexit-driven Economic Policy Uncertainty. Using seasonally adjusted and trend-extracted tourist arrival series along with Brexit uncertainty, we find a strong evidence of long-run persistence in (asymmetric) volatility in tourist arrival. In particular, the BREXIT referendum appeared to create ambiguity among international visitors to the UK. Our results have important policy implications.
Brexit, Hamilton filter, Tourism demand, asymmetric GARCH, structural breaks, volatility persistence
Dutta, Anupam
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Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0
Uddin, Gazi
d8d14ca8-3479-4eb4-a1cd-1df009424ef2
Yang, Yang
139208c7-bb8d-45ce-ae18-274e75a7225c
Dutta, Anupam
b543dc4c-8bd8-46f8-8e51-4d1befa2d8a2
Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0
Uddin, Gazi
d8d14ca8-3479-4eb4-a1cd-1df009424ef2
Yang, Yang
139208c7-bb8d-45ce-ae18-274e75a7225c
Dutta, Anupam, Mishra, Tapas, Uddin, Gazi and Yang, Yang
(2020)
Brexit uncertainty and volatility persistence in tourism demand.
Current Issues in Tourism.
(doi:10.1080/13683500.2020.1822300).
Abstract
Tourism has emerged as one of the leading components of aggregate economic growth in most developed economies, especially in the UK, where it is predicted to grow at an annual rate of 3.8% through 2025. Because tourism demand represents individuals’ choice between leisure and work, a persistence of negative shocks, such as Brexit uncertainty, can be detrimental to the growth of tourism via its impact on agents’ utility function of a directed consumption of leisure for a specific country. This note fills a gap in the literature by providing an econometric estimate of time-varying volatility in tourism demand following Brexit-driven Economic Policy Uncertainty. Using seasonally adjusted and trend-extracted tourist arrival series along with Brexit uncertainty, we find a strong evidence of long-run persistence in (asymmetric) volatility in tourist arrival. In particular, the BREXIT referendum appeared to create ambiguity among international visitors to the UK. Our results have important policy implications.
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Brexit uncertainty and volatility persistence in tourism demand
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Accepted/In Press date: 7 September 2020
e-pub ahead of print date: 24 September 2020
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© 2020 Informa UK Limited, trading as Taylor & Francis Group.
Keywords:
Brexit, Hamilton filter, Tourism demand, asymmetric GARCH, structural breaks, volatility persistence
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Local EPrints ID: 444291
URI: http://eprints.soton.ac.uk/id/eprint/444291
ISSN: 1368-3500
PURE UUID: 44f79c75-7d7d-49b2-a777-991c04a04fbc
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Date deposited: 09 Oct 2020 16:32
Last modified: 17 Mar 2024 05:56
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Author:
Anupam Dutta
Author:
Gazi Uddin
Author:
Yang Yang
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