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The study uses a Markov-switching model (MSM) to investigate the relationship between foreign-exchange earnings from tourism and macroeconomic factors in Taiwan. The MSM decomposes foreign-exchange cycles into a high growth stage (HGS) and a low growth stage (LGS). The steady-state probability remains foreign-exchange earnings from tourism in the HGS and LGS are 0.7486 and 0.8631, respectively. The findings indicate that foreign-exchange earnings from tourism in Taiwan have a high tendency to stay in the LGS state and a low tendency to shift from the LGS state to the HGS state. Furthermore, the results show that macroeconomic factors in Taiwan can continuously affect foreign-exchange earnings from tourism in the HGS. [ABSTRACT FROM PUBLISHER]

This paper contributes to the tourism and hospitality literature by examining Taiwanese policy momentum in the development of Taiwan's cultural and creative industries (CCIs). This study uses a Markov-switching model (MSM) proposed by Hamilton [1989. A new approach to the economic analysis of nonstationary time series and the business cycle.Econometrica,57, 357–384] to analyse the influence of government policies, and the sample comprised 18 Taiwanese CCI stocks for the 2000–2014 period. The MSM decomposes policy-momentum cycles into two distinct states: high volatility and low volatility (HV and LV). The mean growth rate of the HV is 0.87% and the average growth rate of the LV is 10.37%. The state probability that will remain in the LV is 80%, and the state probability that will remain in the HV is 94%, meaning that the probability will shift from an HV (LV) to an LV (HV) is 6% (20%). The findings indicate that cultural creative industries in Taiwan have a high tendency to stay in the HV state and a low tendency to shift from an HV state to an LV state. Empirical results show that Taiwanese government policies were the main activator of development in Taiwan's CCIs and this development can continuously maintain a positive mean growth rate, even in the event of sudden economic downturns. [ABSTRACT FROM PUBLISHER]