‘i’ve Been to Bali Too’ (and I Will Be Going Back): Are Terrorist Shocks to Bali’s Tourist Arrivals Permanent or Transitory?

International visitor arrivals to Bali are examined using univariate and panel Lagrange Multiplier (LM) unit root tests with one and two structural breaks to ascertain if shocks to the time path of tourist arrivals are permanent or transitory. The univariate LM unit root tests with one and two structural breaks fail to reject the null hypothesis of a unit root in international visitor arrivals to Bali. However, the panel LM unit root tests with one and two structural breaks applied to a panel of Bali’s 11 major source markets rejects the null and supports the alternative hypothesis of a joint trend-stationary series with transitory shocks. This result suggests that the effects of the recent terrorist acts on Bali on the growth path of tourist arrivals from major markets are only transitory and that as a consequence Bali’s tourism sector is sustainable in the long run. 1 Department of Economics, Monash University, 900 Dandenong Road, Caulfield East, VIC. 3145, Australia. 2 Department of Management, Monash University, VIC. 3800, Australia. 3 Department of Economics, Monash University. 900 Dandenong Road, Caulfield East, VIC. 3145, Australia. 4 The authors thank Fara Azmat, Jade Bilardi and Fang-Fah Lam for research assistance with this project.