Direct air transport and demand interaction: A vector error-correction model approach |
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| Affiliation: | 1. School of Aviation, University of New South Wales, Sydney, New South Wales 2052, Australia;2. Research School of Finance, Actuarial Studies, and Applied Statistics, Australian National University, School of Aviation, University of New South Wales, Sydney, New South Wales 2052, Australia;3. Faculty of Business and Economics, University of Winnipeg, School of Business, University of Otago, School of Aviation, University of New South Wales, Sydney, New South Wales 2052, Australia;1. School of Public Policy, Oregon State Univeristy, Corvallis, OR 97331, USA;2. Department of Economics, Deakin Univeristy, Burwood VIC 3125, Australia;3. School of Finance, Renmin University of China, Beijing 100871, China;1. Mechanical Engineering, University of Delaware, Newark, DE 19716, United States;2. Linguistics and Cognitive Science, University of Delaware, Newark, DE 19716, United States;3. Electrical and Systems Engineering, University of Pennsylvania, Philadelphia, PA 19104, United States;1. Department of Material Engineering, Faculty of Engineering, Al Quds University, Jerusalem, Palestine;2. Department of Chemistry, Faculty of Science, Al Quds University, Jerusalem, Palestine;1. University of Glasgow;2. University Medical Center Hamburg-Eppendorf;1. Surrey International Institute, Dongbei University of Finance and Economics, Li Jin Building, No. 217 Jian Shan Street, Sha He Kou District, Dalian, 116025, China;2. Department of Tourism, Sport and Hotel Management, Griffith University, Gold Coast Campus, QLD 4222, Australia |
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| Abstract: | The goal of this paper is to impose a cause–effect structure into the relation between tourism demand and air transport capacity. Specifically, we apply a vector error-correction model to assess if, and to what extent, capacity or passenger demand are first-movers that return to long-run equilibrium following short-run deviations. Using data on international aviation between Australia and our test cases of China and Japan, we find that demand on the Japan–Australia market corrects for short-run deviations from the long-run equilibrium quicker than the China–Australia market. Reasons for such variation in adjustment speeds are discussed and we show that the results are robust to the phenomenon of airlines pre-empting demand when setting capacity. |
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