Direct air transport and demand interaction: A vector error-correction model approach

Tay T.R. Koo, David T. Tan and David Timothy Duval

Journal of Air Transport Management, 2013, vol. 28, issue C, 14-19

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.

Keywords: Market equilibrium; Vector error-correction; Air transport capacity (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0969699712001585
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:28:y:2013:i:c:p:14-19

DOI: 10.1016/j.jairtraman.2012.12.005

Access Statistics for this article

Journal of Air Transport Management is currently edited by Anne Graham

More articles in Journal of Air Transport Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().