Volatility in International Tourism Demand for Small Island Tourism Economies

Volatility in monthly international tourist arrivals is defined as the squared deviation from mean monthly international tourist arrivals. Consequently, volatility is directly related to the standard deviation, which is a common measure of financial risk. Fluctuating variations, or conditional volatility, in international monthly tourist arrivals are typically associated with unanticipated events. There are timevarying effects related to SITEs, such as natural disasters, ethnic conflicts, crime, the threat of terrorism, and business cycles in tourist source countries, among others, which cause variations in monthly international tourist arrivals. In this paper, we show how the generalised autoregressive conditional heteroscedasticity (GARCH) model can be used to measure the conditional volatility in monthly international tourist arrivals to six SITEs, namely Barbados, Cyprus, Dominica, Fiji, Maldives and Seychelles, and to appraise the implications of conditional volatility of SITEs for modelling tourist arrivals.