EFFECTS OF THE CONSUMER PRICE INDEX ON THE VOLATILITY OF FOREIGN VISITORS TO VIETNAM

Abstract

     Vietnam tourism is one of the key economic sectors that has contributed a considerable share (4.13%) to GDP of the country in 2012. With many beautiful landscapes, diverse cultures, long history, etc. Vietnam has been rated as a fully potential destination for foreign visitors. However, high inflation in the host country resulted in expensive tourism expenses may affect the volatility of foreign visitors to Vietnam. The paper examined the effects of the 1, 2, 3, 4, 5 and 6 month lagged consumer price indices (CPI) as exogenous (X) variables on the volatility of foreign visitors to Vietnam, using the GARCH(1,1)-X models. The results showed that the volatility of foreign visitors to Vietnam is characterized by a heteroscedastic process and the volatility is positively influenced by the lagged CPI. The findings are important implications for policy makers, tourism enterprises and investors in Vietnam tourism industry.