Modeling and Forecasting Monthly Tourism Arrivals to Aruba Since COVID-19 Pandemic

IMF Working Papers, November 11, 2022

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Estimates and evaluates a time-series model with exogenous regressors (ARIMA-X) using Aruba as a case study.
Investigates informational value of:
- Google Searches originating in the USA,
- flight capacity utilization on the US air-carriers,
- US real personal consumption expenditure,
- volatility index in stock markets (VIX).
Produces out-of-sample forecasts with 5 percent confidence intervals for 18 months ahead.

Flight capacity is the best variable to account for the travel restrictions during the pandemic.
US real personal consumption expenditure becomes a more significnat predictor than income as the former better captured impact of the COVID-19 restrictions on the consumers’ behavior, while income boosted by the pandemic fiscal support was not fully directed to spending.
Intercept correction improves the model in the estimation period.
The pandemic changed econometric relationships between the tourism arrivals and their main determinants, and accuracy of the forecast models.
Going forward, the analysts should re-estimate the models.

Short-term forecasting models of monthly tourism arrivals benefit from ARIMA-X specification that includes flight capacity utilization and US consumption measures.
Forecasts provided include 5 percent confidence intervals and span 18 months ahead, highlighting the need to monitor evolving relationships post-pandemic and to update model estimates regularly.

Capacity utilization, COVID-19, Economic forecasting, Economic sectors, Health, Labor, Production, Tourism, Unemployment rate
arima, arrivals, arrivals to Aruba, Aruba, Aruba tourism authority, Capacity utilization, Caribbean, consumption expenditure, Covid-19, Econometric Modeling, flight capacity utiilization, Forecasting, Google Trends, IMF working papers, load factor, Pandemic, time-series econometrics, time-series model, time-series models, tourism, tourism arrival, tourist arrivals, Unemployment rate

Modeling and Forecasting Monthly Tourism Arrivals to Aruba Since COVID-19 Pandemic, IMF Working Paper No. 2022/226.