This paper improves short-term forecasting models of monthly tourism arrivals by estimating and evaluating a time-series model with exogenous regressors (ARIMA-X) using a case of Aruba, a small open tourism-dependent economy. Given importance of the US market for Aruba, it investigates informational value of Google Searches originating in the USA, flight capacity utilization on the US air-carriers, and per capita demand of the US consumers, given the volatility index in stock markets (VIX). It yields several insights. First, flight capacity is the best variable to account for the travel restrictions during the pandemic. Second, US real personal consumption expenditure becomes a more significnat predictor than income as the former better captured impact of the COVID-19 restrictions on the consumers’ behavior, while income boosted by the pandemic fiscal support was not fully directed to spending. Third, intercept correction improves the model in the estimation period. Finally, the pandemic changed econometric relationships between the tourism arrivals and their main determinants, and accuracy of the forecast models. Going forward, the analysts should re-estimate the models. Out-of-sample forecasts with 5 percent confidence intervals are produced for 18 months ahead.
International Monetary Fund. Western Hemisphere Dept.
Aruba managed to contain the pandemic in the first months of the outbreak but experienced a resurgence of new infections in the summer. The economic impact of COVID-19 is particularly severe given Aruba’s high dependency on tourism. While the authorities’ swift response has helped contain the human and economic damage, it could not avoid a severe GDP contraction.
This Technical Assistance report on Kingdom of the Netherlands—Aruba focuses on the mission undertaken to assist the Central Bureau of Statistics (CBS) in assessing and improving the national accounts. The CBS plans to recompile and disseminate the revised annual current price estimates by January 2020, and improved constant 2013 price estimates by June 2020. The mission and the Director of the CBS met with the Minister of Finance, Economic Affairs and Culture to discuss the rebased estimates and the 2020–2025 action plan. The budget, staffing, and data coordination plans of the CBS were also discussed. The Minister agreed to establishing formal data coordination agreements between the CBS and other government institutions, and on the need for the legislation and related reporting procedures to be strengthened. She also agreed to the 2020–2025 action plan to implement the Special Data Dissemination Standard for real-sector statistics, the need for benchmark and regular surveys, and to incrementally increasing the CBS budget and staffing, subject to Cabinet approval.
Monetary independence is at the core of the macroeconomic policy trilemma stating that an independent monetary policy, a fixed exchange rate and free movement of capital cannot exist at the same time. This study examines the relationship between monetary autonomy and inflation dynamics in a panel of Caribbean countries over the period 1980–2017. The empirical results show that monetary independence is a significant factor in determining inflation, even after controlling for macroeconomic developments. In other words, greater monetary policy independence, measured as a country’s ability to conduct its own monetary policy for domestic purposes independent of external monetary influences, leads to lower consumer price inflation. This relationship—robust to alternative specifications and estimation methodologies—has clear policy implications, especially for countries that maintain pegged exchange rates relative to the U.S. dollar with a critical bearing on monetary autonomy.