Three Essays in Tourism Finance: Chinese Tourists to Taiwan

With the rising tide of globalization, international exchanges and interactions are becoming increasingly frequent. International tourism has become one of the most important and fastest growing industries in Taiwan. With President Ma Ying-Jeou relaxed the Cross-Strait tourism policy since 2008, from 2010 onwards, China has quickly become the largest source of international tourists visiting Taiwan. Consequently, China has also become the major country affecting the development of Taiwan’s tourism economy. This dissertation contains three essays. The study uses Chinese tourists as the major focus of its analysis. Three essays in this thesis focuses on tourism finance in the Chinese Tourists to Taiwan during the year 2013 to 2018. The first essay examines the impact of Cross-Strait political and disaster-related events on the numbers of Chinese tourists visiting Taiwan during the period 2014 - 2018. We use the event study method to observe whether the numbers of tourists have changed abnormally before and after the occurrence of major events on both sides of the Strait. Ordinary least-squares (OLS) and three different types of conditional variance models, namely, GARCH (1,1), GJR (1,1), and EGARCH (1,1), are used to estimate the abnormal rate of change in the number of tourists. The empirical results show Group-type tourists are the most sensitive to the impact of Cross-Strait political events. Second, Individual-type and Medical-type tourists are not affected by political events. From the results of the disaster-related event research, it has been found that the impact of disasters and accidents on the number of Chinese tourists visiting Taiwan mainly depends on the level of an incident’s impact. These suggests that tourism businesses in Taiwan should enhance their own competitiveness, and extricate themselves from the vicious cycle of price competition (low cost group tourism). To promote a unique style of tourism, establish tourism groups with specific purposes, and create a friendly and safe tourism environment. The second essay investigates the short-run and long-run persistence of shocks to the change rate of Chinese tourists to Taiwan. The daily data used for the empirical analysis is from 1 January 2013 to 28 February 2018. Three widely-used univariate conditional volatility models, namely GARCH(1,1), GJR(1,1) and EGARCH(1,1), are used to measure the short-run and long-run persistence of shocks, as well as symmetric, asymmetric and leverage effects. Three different Heterogeneous AutoRegressive (HAR) models, HAR(1), HAR(1,7), and HAR(1,7,28), are considered as alternative mean equations for capturing a variety of long memory effects. The mean equations associated with GARCH(1,1), GJR(1,1) and EGARCH(1,1) are used to analyse the risk persistence of the change in Chinese tourists. The exponential smoothing process is used to adjust the seasonality around the trend in Chinese tourists. The empirical results show asymmetric impacts of positive and negative shocks on the volatility of the change in the number of Group-type and Medical-type tourists, while Individual-type tourists display a symmetric volatility pattern. Somewhat unusually, leverage effects are observed in EGARCH for Medical-type tourists, which shows a negative correlation between shocks in tourist numbers and the subsequent shocks to volatility. For both Group-type and Medical-type tourists, the asymmetric impacts on volatility show that negative shocks have larger effects than do positive shocks. The leverage effect in EGARCH for Medical-type tourists implies that larger shocks would decrease volatility in the change in the numbers of Medical-type tourists. These results suggest that Taiwan tourism authorities should act to prevent the negative shocks for the Group-type and Medical-type Chinese tourists to dampen the shocks that arise from having fewer Chinese tourists to Taiwan. The third essay examines the spillover effects between the rate of change in the numbers of Chinese tourist arrivals and the rate of change in the numbers of international traveller arrivals. Using daily data for Chinese tourists and international travellers visiting Taiwan over the period from 1 January 2014 to 28 February 2018, together with the Diagonal BEKK model. The empirical results show that there is positive Granger causality relationship between the change rate in the number of international travellers in the previous period on the numbers of Chinese tourists in the current period visiting Taiwan. Moreover, international tourism demand had spillover effects on to Chinese tourism demand that were greater than the Chinese tourism demand spillover effects on to international tourism demand. The empirical findings suggest that Taiwan should abandon its development strategy of focusing only on a single market, namely China, and to be pro-active in encouraging visits by international travellers to Taiwan for sightseeing purposes, thereby increasing the willingness of international travellers to visit Taiwan.補正完