Convergence and Cointegration Analysis under Structural Breaks: Application of Turkey Tourism Markets

Berhan Çoban and Esin Fi̇ruzan

Sosyoekonomi Journal, 2019, issue 27(39)

Abstract: The purpose of this study is to examine the cointegration structure and to test the convergence hypothesis in Turkey’s tourism markets with monthly data over the period 1996-2016. To check the existence of convergence, we used international tourist arrivals to Turkey from each of Turkey’s 23 major markets. International tourist arrivals data of Turkey may comprise structural changes and volatility. These attributes may negatively affect the reliability of unit root and cointegration tests outcomes. Ignorance of volatility and breaks leads to decrease in the number of convergent tourism markets. Conventional Dickey Fuller unit root test, recently developed Lagrange multiplier (LM) and Residual Augmented Least Squares (RALS-LM) tests are performed to test the existence of convergence in the tourism market. Gregory Hansen and RALS based cointegration tests are used for checking long run relationship of the tourist arrivals data. The study reveals strong evidence that most of the tourism markets for Turkey are converging. This means that tourism policies and strategies are successful for convergent tourism markets. In addition, there is some long run relationship among the different tourism markets in the presence of structural break and volatility.Classification-JEL:Z32, C22, C58.Keywords:Convergence Hypothesis, Unit Root test, Tourism Markets, Cointegration, Structural Breaks.

Date: 2019
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