Testing the Unit Root Hypothesis When the Alternative Is a Trend Break Stationary Process: An Application to Tourist Arrivals in Fiji

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Narayan, Paresh
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2005
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Abstract

The unit root hypothesis owes much to the work of Dickey and Fuller and has gained momentum since the seminal contribution of Perron (1989), who introduced the idea of structural breaks in unit root tests. In a recent study Sen (2003), extending the work of Zivot and Andrews (1992), recommends the F-test statistic for a unit root in the presence of a structural change in the economy. The central aim of this paper is to apply the Sen test to tourist arrivals to Fiji. The idea behind this exercise is to identify the year of the structural break and, more importantly, to examine whether the break has had a permanent or temporary effect on tourist arrivals in Fiji. Among our key results, we find that visitor arrivals in Fiji from Australia, New Zealand and the USA are stationary, implying that shocks have a temporary effect.

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TOURISM ECONOMICS

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11

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3

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Applied Economics

Business and Management

Tourism

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