Xuan Tran
The University of West Florida

APPLICATION OF VECTOR AUTOREGRESSIVE MODEL IN TOURISM

Although tourism development in North East Asia is growing increasingly competitive, there has been limited research focusing on applying time series analyses to analyze the competition between tourist country destinations. This study will use Vector Auto Regressive (VAR) model, Vector Error Correction (VEC) model, and Granger analysis to explore the causal short and long-term tourism impacts of China and Japan on North East Asia destinations. Findings indicate that neither China nor Japan have short-run influence on tourism development. Interestingly, the long-run inbound tourism of China will depend on the inbound tourism of Japan but not vice versa. The study also finds that Japan has a dominant strategy in the zero-sum game with China, thus strengthening tourism will boost the Japanese economy.

Keywords: Inbound and Outbound tourism, Vector Auto Regressive, Vector Auto Correction, Granger Analysis, Nash equilibrium, Dominant strategy.

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