Regression - Correlation Between Visitors Arrival and Gdp Per Capita

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Time-series Regression Analysis:

A time-series regression analysis was conducted to study the correlation between the number of Chinese visitors to Singapore and the Chinese GDP (gross domestic product) per capita. The analysis was conducted by taking into account 10 years of data.

Regression Equation:

y = a + bx, where

• x: the Chinese GDP per capita
• y: the annual number of Chinese visitors to Singapore
• a: the intercept
• b: the slope

Substituting a and b values from the regression output in the above equation, we get:

y = 377.21 + 0.24x

Key observations:

1. Adjusted R-square: The adjusted R-square value of 0.8 (refer Figure 1) is above the required minimum value of 0.7 for this time-series correlation to be significant. It indicates that 80% of the increase in number of Chinese visitors to Singapore can be explained by the increase in Chinese GDP per capita over a period of 10 years. The remaining 20% could be explained by other variables such as increase in the number of budget airlines to Singapore, increase in number of tourist attractions in Singapore, expansion of China based businesses into the Singaporean market etc.
2. t-statistic: With 10 observations and 2 variables, there are 8 degrees of freedom. Hence, at 5% significance level, the critical t-value is 2.31. From our regression output (refer Figure 1), the t-statistics of 2.32(intercept) and 6.24(independent variable), which are greater than the critical-t value, indicate that the regression analysis is significant.
3. p-value: From our regression output, p-values of 0.04877 and 0.00025 (refer Figure 1) for the intercept and independent variable respectively, are lower than 0.05, which indicate the probability of rejecting the null hypothesis - that there is no correlation between the number of Chinese visitors to Singapore and the Chinese GDP per capita - at the 5% significance level.
4. Inference: In conclusion, over a period of 10 years, there has been a positive linear relationship (refer Figure 2) between the number of Chinese visitors to Singapore and the GDP per capita of China. This means that as the GDP of China increases and generally more Chinese citizens become affluent, they therefore have a higher propensity to spend on overseas vacation. China's increased global trade and commercial dealings would also see more travellers going overseas for business purposes. Singapore is one of the many popular destinations for these two groups of travellers from China.

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   Figure 1: Time-series Regression Output

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Figure 2: Number of Chinese visitors to Singapore vs Chinese GDP per capita