Tourism in ASEAN‐5: A novel panel unit‐root test for shocks persistence with gradual structural breaks and common factors

Abstract

This study investigates whether shocks to tourist arrivals in Indonesia, Malaysia, Philippines, Singapore, and Thailand (ASEAN‐5) are permanent or transitory, given the frequent and severe external shocks experienced by the tourism industry. Using monthly data from 2000 to 2019, we employ a novel panel unit‐root test that controls for cross‐correlations, multiple gradual structural breaks, and other nonlinearities present in the data to assess the stationarity properties of tourist arrivals. Additionally, we apply a panel unit‐root test that controls for cross‐correlations and allows for abrupt structural changes for robustness. The empirical findings reveal that shocks to tourist arrivals in the ASEAN‐5 countries exert persistent effects. Our results demonstrate nonstationarity within the series, illuminated by our careful consideration of both gradual and abrupt structural breaks. This finding underscores the necessity for policy interventions to mitigate the impact of adverse shocks on the tourism industry.