The sustainability of tourist arrivals index under non-linear dynamics: evidence from panel smooth transition approach

In this paper, we investigate the degree of sustainable growth rates in terms of number of tourists to Taiwan. By using foreign exchange rate as transition variable, we employ panel smooth transition regression (PSTR) model to estimate the threshold effects of changes in foreign exchange rate at different times to the growth rate of number of tourists to Taiwan in a dynamic and ever-changing environment. Firstly, our findings support the use of nonlinear model to explain the sustainability of growth rates in terms of number of tourists to Taiwan. Secondly, to prove the values of sustainable growth rates in a smooth transition process is dependent on the foreign exchange rate changes, the result that cannot be capture by conventional linear model. Finally, if period lagged tourist growth rates are selected as the explanatory variable, this implies meaningful top-down observation significance, and its highest degree of persistence in terms of tourist growth rate reached 88.29%. This phenomenon can be further interpreted as the willingness and efforts offered and spent by both public and private sectors in promoting tourist from all over the world to Taiwan.