A Markov Regime-Wwitching (MS) Approach to Modeling the Effects of Fiscal Policies and COVID-19 Pandemic on Tourism Destination Competitiveness in Kenya
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Date
2022
Authors
Kimunio, Isaac
Maingi, Shem Wambugu
Journal Title
Journal ISSN
Volume Title
Publisher
Emerald
Abstract
Purpose – The COVID-19 pandemic has had a catastrophic impact on the tourist activity in Kenya. Global
lockdown has limited travel resulting to losses in the tourism sector. This paper discusses the specific role that
fiscal policy plays to improve tourism competitiveness in Kenya. Specifically, the study examines how Kenyan
government can revive the tourism economy to improve its competitiveness.
Design/methodology/approach – A tourism demand model to explore relationship between fiscal policies and
inbound tourism in Kenya is developed. This study uses a Markov regime-switching (MS) regression model to
establish the relationships that exist between COVID-19 pandemic, fiscal policies and tourism revenue in Kenya.
Findings –The estimation results of the Markov-switching dynamic regression showed that the coefficients of
international tourists arrivals, domestic bed occupancy and international bed occupancy are positive and
significant with p-values of 0.000 during the pandemic period. The findings show that the transitioning periods
during the fiscal policy shifts had an effect on the international arrivals. Therefore, fiscal incentives were key in
influencing tourism arrivals and bednights occupancies.
Research limitations/implications – The theoretical implications show that to promote the state of high
international and domestic tourist arrivals, the government should encourage more fiscal spending initiatives that
encourage the increase in tourist arrivals and occupancies such as vaccinations against COVID-19 and promoting
safe spaces for visitors within the destination is key towards reviving the sector. In order to curb the hysteresis
effects of COVID-19 related depression and resultant impacts on GDP, there is a need to review the national fiscal
policies and target fiscal policies on the cyclical effects of the COVID-19 impacts on international tourism market.
Originality/value – This research develops an economic model that builds accurate relationships between
fiscal policies, pandemics and tourism destination competitiveness as a means of informing competitive
tourism management strategies and governance.
Description
A Research Article in the Journal of Hospitality and Tourism
Insights
Keywords
Markov regime-switching, Tourism destination competitiveness, Fiscal policy, Tourism economics, Kenya
Citation
Kimunio, I., & Maingi, S. W. (2022). A Markov regime-switching (MS) approach to modeling the effects of fiscal policies and COVID-19 pandemic on tourism destination competitiveness in Kenya. Journal of Hospitality and Tourism Insights.