||Greenidge, Kevin (1998)
Tourism is the most important economic activity in Barbados. For example, the contribution of tourism to Gross Domestic Product (GDP) increased from 8.9% in 1971 to 16.1% in 1996. In addition, tourist receipts in 1997 accounted for 56% of all foreign exchange receipts and employed 15% of the labour force. Clearly the forecast of tourism is a leading component in the forecast of the Barbados economy. This paper attempts to build a forecasting model based on Structural Time Series Modelling approach, where we combine regression with time series analysis. A Structural Time Model (STM) is set up based on observed components – trends, seasonals and cycles – all of which have direct interpretations. These components can be allowed to vary with time and explanatory variables are included wherever possible. Such a model will allow us to extract the maximum amount of information contained in the series on tourist arrivals while at the same time include any other information relevant to forecasting arrivals.