Thailand¡¯s International Tourism Demand: Seasonal Panel Unit Roots and the Related Cointegration Model

Tourism is the main service sector in Thailand. It generated about 6.5% of national income (GDP) in 2009. 547 billion baht came from international tourists and 380 billion baht from domestic tourists in 2008. This study analyzes panel data by using the seasonal unit roots test. Firstly, we apply the CHEGY-IPS panel seasonal unit roots test developed by Otero (2007). Secondly, we develop a long run relationship model to estimate the number of international tourists to Thailand from 1997 to 2010 using the generalized method of moments (GMM).The results reveal panel seasonal unit roots in all model variables: GDP of the tourists¡¯ country of origin, competitive ratio of CPI between Thailand and country of origin, currency exchange rates, and transportation costs. The results from cointegration estimation by the GMM demonstrate that there is a positive relationship between GDP and the number of international tourist arrivals: a 1% increase of GDP leading to an increase of 1.5% of the number of international tourists. Regarding the exchange rate, a negative relationship is found: a 1% stronger Thai currency will lead to a decrease of 0.55% in the number of international tourists. Lastly, season has a significant effect upon the number of tourists. The number of tourists in January to March is higher than in other quarters.