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Predicting tourism recovery from COVID-19: A time-varying perspective

Author

Listed:
  • Liu, Ying
  • Wen, Long
  • Liu, Han
  • Song, Haiyan

Abstract

The uncertainties associated with the coronavirus disease 2019 (COVID-19) pandemic significantly reduced the accuracy of traditional econometric models in forecasting tourism demand, as the relationship between tourism demand and its determinants during the crisis changes over time. To address these inaccuracies, we apply three Factor mixed data sampling (MIDAS) models with different time-varying parameter (TVP) settings: Factor TVP-MIDAS, Factor MIDAS with stochastic volatility (Factor MIDAS-SV), and Factor TVP-MIDAS-SV. We examine the dynamic relationship between tourism demand and its influencing factors, capture the uncertainty and volatility in the data, and provide short-term forecasting and nowcasting. We expose the Factor MIDAS models with TVP specifications to different combinations of determinants to examine their performance. The empirical results show that the Factor MIDAS models with TVP settings performed better than the Factor MIDAS model in the short-term forecasting and nowcasting of tourism demand during COVID-19. The results also suggest that high-frequency data complement these Factor MIDAS models with TVP settings in improving the forecasting and nowcasting accuracy during crises.

Suggested Citation

  • Liu, Ying & Wen, Long & Liu, Han & Song, Haiyan, 2024. "Predicting tourism recovery from COVID-19: A time-varying perspective," Economic Modelling, Elsevier, vol. 135(C).
    • Handle: RePEc:eee:ecmode:v:135:y:2024:i:c:s0264999324000622
    DOI: 10.1016/j.econmod.2024.106706
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    More about this item

    Keywords

    Tourism recovery; Nowcasting; Time-varying; Mixed-frequency; COVID-19;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Z3 - Other Special Topics - - Tourism Economics

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