Modelling the impact of COVID-19 in small pacific island countries

ABSTRACT

This paper studies the economic impact of COVID-19 in Fiji, Tonga, and Vanuatu. The UNWTO’s International Tourism 2020 Scenarios and the World Bank’s projected decline in remittance flows are treated as negative COVID-19 led shocks in the nonlinear autoregressive distributed lag (NARDL) model. Negative tourism shocks are significant for all three countries, whereas negative remittance shocks are significant for Tonga only. Thus, the economic effects of COVID-19 are propagated by tourism for all three countries, whilst remittance is a COVID-19 transmission channel for Tonga only. Simulations with the projected declines in tourism and remittances suggest that Vanuatu would experience the greatest decline in growth and highest uncertainty, whilst Tonga would face the lowest decline and uncertainty.

KEYWORDS:

• COVID-19
• UNWTO International Tourism 2020 Scenarios
• pacific island countries
• Tourism
• Remittances

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The choice of the countries for analysis is also dictated by the availability of suitable data.

2 Upon the recommendation of an anonymous reviewer, we considered the Lee-Strazicich structural break test. The breaks derived from this test were insignificant in the analysis and hence dropped from the analysis.

3 These results are not presented to conserve space but are available upon request.