Domestic air passenger traffic and economic growth in China: Evidence from heterogeneous panel models

This paper applies recent panel methodology to examine the short-run dynamics, the long-run equilibrium relationships and the Granger causal relationship between economic growth and domestic air passenger traffic. It is based on the quarterly panel data of 29 provinces in China from the period of 2006Q1 to 2012Q3. Tests for panel unit roots, cointegration in heterogeneous panels and panel causality are employed in a bi-variate panel vector error correction model (PVECM), which is estimated by the system generalized moment method (SYS-GMM). The results show evidence of a long-run equilibrium relationship between economic growth and domestic air passenger traffic. Specifically, 1% increase in the air passenger traffic is found to lead to an increase of 0.943% in real gross domestic product (GDP). A long-run and strong bi-directional Granger causal relationship is found between these two series. It is also found that there is a short-run uni-directional Granger causality running from the domestic air passenger traffic to the economic growth.

[1]  Min-Hsien Chiang,et al.  On the Estimation and Inference of a Cointegrated Regression in Panel Data , 1997 .

[2]  Andrew T. Levin,et al.  Unit root tests in panel data: asymptotic and finite-sample properties , 2002 .

[3]  Franz Rothlauf,et al.  Gravity models for airline passenger volume estimation , 2007 .

[4]  C. Granger,et al.  Co-integration and error correction: representation, estimation and testing , 1987 .

[5]  G. Maddala,et al.  A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test , 1999 .

[6]  R. Blundell,et al.  Initial Conditions and Moment Restrictions in Dynamic Panel Data Models , 1998 .

[7]  Elton Fernandes,et al.  The causal relationship between GDP and domestic air passenger traffic in Brazil , 2010 .

[8]  Atef Ghobrial,et al.  An analysis of the determinants of regional air travel demand , 1994 .

[9]  Chihwa Kao,et al.  Spurious Regression and Residual-Based Tests for Cointegration in Panel Data When the Cross-Section and Time-Series Dimensions are Comparable , 1996 .

[10]  Piet Rietveld,et al.  The Regional Economic Impact of an Airport: The Case of Amsterdam Schiphol Airport , 2001 .

[11]  Kenneth Button,et al.  The Role of Small Airports in Economic Development , 2010 .

[12]  Keith G. Debbage,et al.  THE GEOGRAPHY OF AIR PASSENGER VOLUME AND LOCAL EMPLOYMENT PATTERNS BY US METROPOLITAN CORE AREA, 1973-1996 , 2001 .

[13]  Kenneth Button,et al.  International air transportation and economic development , 2000 .

[14]  Fredrik Kopsch.  A demand model for domestic air travel in Sweden , 2012 .

[15]  Haiyan Song,et al.  Air Travel Demand Studies: A Review , 2010 .

[16]  J. M. Seixas,et al.  A multivariate neural forecasting modeling for air transport – Preprocessed by decomposition: A Brazilian application , 2009 .

[17]  Koon Nam Henry Lee.  Forecasting long-haul tourism demand for Hong Kong using error correction models , 2011 .

[18]  Jan K. Brueckner,et al.  Airline Traffic and Urban Economic Development , 2003 .

[19]  P. Gil.  Animal spirits and the composition of innovation in a lab-equipment R&D model with transition , 2009 .

[20]  Kenneth Button,et al.  High-technology employment and hub airports , 1999 .

[21]  Kaddour Hadri,et al.  Testing for Stationarity in Heterogeneous Panel Data , 2000 .

[22]  M. Pesaran,et al.  Testing for unit roots in heterogeneous panels , 2003 .

[23]  Yu Wei Chang,et al.  Air cargo expansion and economic growth: Finding the empirical link , 2009 .

[24]  Haoming Liu,et al.  Airline passenger fatality and the demand for air travel , 2007 .

[25]  Andrew R. Goetz,et al.  Air Passenger Transportation and Growth in the U.S. Urban System, 1950–1987 , 1992 .

[26]  P. Pedroni.  Current Version : July 25 , 1999 CRITICAL VALUES FOR COINTEGRATION TESTS IN HETEROGENEOUS PANELS WITH MULTIPLE REGRESSORS * , 1999 .

[27]  Kirsi Mukkala,et al.  Air Transportation and Regional Growth: Which Way Does the Causality Run? , 2013 .

[28]  Moritz Lennert,et al.  An analysis of the determinants of air traffic volume for European metropolitan areas , 2011 .

[29]  In Choi,et al.  Unit root tests for panel data , 2001 .

[30]  A. Duckworth.  The Broken Hill Strike , 1893 .

[31]  Jörg Breitung,et al.  The local power of some unit root tests for panel data , 1999 .

[32]  V. Grimm,et al.  Sequential versus Bundle Auctions for Recurring Procurement , 2007 .

[33]  Juliet A Melville.  AN EMPIRICAL MODEL OF THE DEMAND FOR INTERNATIONAL AIR TRAVEL FOR THE CARIBBEAN REGION. , 1998 .

[34]  C. Granger.  Investigating causal relations by econometric models and cross-spectral methods , 1969 .

[35]  M. Arellano,et al.  Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations , 1991 .

[36]  Richard K. Green,et al.  Airports and Economic Development , 2007 .

[37]  Tolga Cenesizoglu,et al.  Forecasting (Aggregate) Demand for U.S. Commercial Air Travel , 2010 .