ECONOMIC AND PREDICTIVE ANALYSIS OF THE INTERACTION BETWEEN MAJOR INDUSTRIES IN THE ECONOMY OF MACAO

Since early times, the effects of a booming sector in other sectors of a small economy have
been of interest to scholars. There is a general perception that the booming Gaming sector has
contributed to the overall growth in Macau through the trickle-down effect, passing on the
benefits of growth to other sectors. After the liberalization of the gaming industry in 2002, this
booming sector experienced several years of exponential growth, becoming the driving
industry for Macao’s economy. Several scholars and researchers have dedicated their studies
to the effects of the casino gaming industry as a booming sector in such a small economy.
However, there is a gap in what concerns measuring the influence of the Gaming sector as a
driving industry for several other sectors or following industries of Macau’s economy. The
purpose of this research study is to investigate in what measure the Gaming sector in Macao
leveraged the other economic sectors and how related or correlated are the different industries
of Macao’s Economy. A protocol-driven understanding of the state of the art on the

interrelations between economic sectors and different techniques used to study those inter-
relations was conducted through a systematic literature review. Given the limited available data

on the Gross Value Added (GVA), or Gross Domestic Product (GDP) on the supply side, as a
central measure of economic activity in the different sectors, several possible interpolation
models using auxiliary high-frequency data (indicators) were compared, to achieve the optimal
model for interpolation of each variable. Several forecasts for the future performance of
Macau's four major economic sectors were presented based on different regression techniques.
Autoregressive Integrated Moving Average (ARIMA) models were developed to assess the
dependence of the future performance of a sector’s GVA on its past performance. Optimal
Vector Autoregressive (VAR) models were created to identify the explanatory power of some
sectors of Macau’s economy in others.

Based on available auxiliary data in high-frequency (quarterly) it was possible to interpolate
the quarterly GVA per economic sector, available only in low-frequency (annually), for the
major sectors of Macao’s economy. Some sectors have a considerable explanatory power on
the performance of other sectors, however, the proposed regression models did not identify a
clear relation between the performance of the Gaming sector and the performance of other
major sectors from Macao’s economy.