Modelling Quarterly Tourist Flows to Australia Using Cointegration Analysis

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Abstract
The purpose of this paper is to use cointegration analysis to estimate the long-run relationship between quarterly tourist flows to Australia from the USA, Japan, to UK and New Zealand and the factors such as income, price and airfare that influence arrivals. To this end, the demand function approach to tourism flow modelling is employed. The new econometric modelling approach of cointegration analysis adopted in this paper has not been used in previous studies of tourism demand modelling. This method is capable of overcoming the problem of ‘spurious regression’ associated with traditional econometric modelling approach for estimating the tourism demand function. For the countries of origin, the estimated long-run income elasticity is greater than one, and considerably higher for Japan. UK tourists are more responsive to changes in airfares than to changes in income. The estimated long-run elasticity with respect to the relative price variable for the UK and Japan is close to unity, and for the USA and New Zealand it is greater than one.

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