Mr. Sebastian Acevedo Mejia, Lu Han, Miss Marie S Kim, and Ms. Nicole Laframboise
This paper studies the role of airlift supply on the tourism sector in the Caribbean. The
paper examines the relative importance of U.S.-Caribbean airlift supply factors such as the
number of flights, seats, airlines, and departure cities on U.S. tourist arrivals. The possible
endogeneity problem between airlift supply and tourist arrivals is addressed by using a
structural panel VAR and individual country VARs. Among the four airlift supply
measures, increasing the number of flights is found to be the most effective way to boost
tourist arrivals on a sustained basis. As a case study, the possible crowding effect of
increasing the number of U.S. flights to Cuba is investigated and, based on past
observations, we find no significant impact on flights to other Caribbean countries. The
impact of natural disasters on airlift supply and tourist arrivals is also quantified.
This paper quantifies the economic impact of uncertainty shocks in the UK using data that span the recent Great Recession. We find that uncertainty shocks have a significant impact on economic activity in the UK, depressing industrial production and GDP. The peak impact is felt fairly quickly at around 6-12 months after the shock, and becomes statistically negligible after 18 months. Interestingly, the impact of uncertainty shocks on industrial production in the UK is strikingly similar to that of the US both in terms of the shape and magnitude of the response. However, unemployment in the UK is less affected by uncertainty shocks. Finally, we find that uncertainty shocks can account for about a quarter of the decline in industrial production during the Great Recession.
For some 15 years, from the mid-1950s to the late 1960s, the record of prices and unemployment in the United States supports the notion of a trade-off between unemployment and inflation, implying that unemployment can as a rule be reduced only at the expense of rising inflation unless structural conditions in labor and product markets are changed or direct controls are brought to bear on wages and prices. In recent years, however, as the United States has been confronted with high unemployment and inflation simultaneously, this trade-off seemed not only to have worsened but, at times when both unemployment and inflation were rising, seemed no longer to exist. While there is evidence that the response of prices to unemployment is delayed, so that relatively high rates of unemployment and inflation may temporarily coexist, the lag involved has been no longer than six months on average and it is implausible that it would have lengthened sufficiently to account for the persistence of high unemployment and inflation in the years 1970 and 1971. Rather, the explanation appears to lie elsewhere. The literature has referred to changes in the demographic composition of unemployment—raising the unemployment rate that corresponds to a given degree of demand pressure—and to influences not necessarily associated with unemployment though affecting its trade-off against inflation. Among these influences are differential reactions of wages to increases of different magnitude in the cost of living and the role of expectations with respect to inflation.1