LAUSR

Applying cointegration analysis on the monthly data of Singapore, this research note examines the impacts of global economic policy uncertainty (GEPU) and domestic economic policy uncertainty (DEPU) on the hotel room demand. Although control variables, such as average room rates, industrial production index and international tourist arrivals, are used and the specific-to-general modelling is adopted, the results show that the standard diagnostic tests may be incapable of identifying possible model mis-specification. The main findings show that DEPU has a negative impact, but GEPU has a positive impact on the hotel room demand. DEPU is linked to the political instability of Singapore, which discourages international travellers to visit Singapore. GEPU enhances Singapore’s position as a stable business and financial hub in relation to others and thereby increases business travel.