Travel Shocks to the Chinese Economy: A Fractional Integration Approach

This paper examines the degree of persistence of China's travel "credit" and "debt" series in the balance of payments. This is an important issue because the travel component in the balance of payments of travel is one of the main indicators measuring the contribution of tourism to a country's economic activity, and knowledge of its persistence is critical to assess the potential impact of disrupting factors such as the COVID-19 pandemic. The analysis is carried out using a fractional integration framework, which provides evidence of mean reversion in the credit series, but not in the debt series. The policy implications of these findings are also discussed.