Do External Shocks Have a Permanent or a Transitory Effect on Thailand's Tourism Industry?

Given the number and the frequency of external shocks encountered by Thailand in the last two decades, this study identifies the number and the location of the breaks and tests to determine whether the breaks have a transitory or a permanent effect on international tourist arrivals to Thailand for its top 10 source countries using both univariate and panel unit root tests with structural breaks. The findings suggest that break dates coincide with the Asian financial crisis, the September 11 attack, and the SARS and the bird flu outbreaks. The univariate unit root tests with structural breaks reject the null hypothesis of a nonstationarity in tourist arrivals from all countries. Furthermore, panel unit root tests with one and two structural breaks also reject the joint null hypothesis of a nonstationarity. These findings imply that external shocks have only a transitory effect on tourist arrivals and Thailand's tourism sector will return to its long-run equilibrium path.