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Co-integration Analysis of Aviation Demand and Economic Growth in Philippines

Author

Listed:
  • Bilal Mehmood

    (GCUniversity, Lahore, Pakistan)

  • Amna Shahid

    (GCUniversity, Lahore, Pakistan)

  • Saddam Ilyas

    (GCUniversity, Lahore, Pakistan)

Abstract

Purpose: This paper is empirically analyses the aviation-led growth hypothesis for Philippines by testing causality between aviation and economic growth. We resort to econometric tests such as unit root tests and test of cointegration purposed by Johansen (1988). Methodology: Fully Modified OLS, Dynamic OLS and Conical Cointegration Regression are used to estimate the cointegration equation for time span of 1970 to 2012. Findings: Empirical results reveal the existence of cointegration between aviation demand and economic growth. Graphic methods such as Cholesky impulse response function (both accumulated and non-accumulated) and variance decomposition have also been applied to render the analysis rigorous. The positive contribution of aviation demand to economic growth is similar in all three estimation techniques of cointegration equation. Finally Granger causality test is also applied to find the direction of causal relationship. Recommendations: Findings help in chalking out the importance of aviation industry in economic growth for Philippines.

Suggested Citation

  • Bilal Mehmood & Amna Shahid & Saddam Ilyas, 2015. "Co-integration Analysis of Aviation Demand and Economic Growth in Philippines," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(6), pages 271-277, June.
  • Handle: RePEc:ijr:journl:v:3:y:2015:i:6:p:271-277
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    References listed on IDEAS

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    More about this item

    Keywords

    Aviation; Economic Growth; the Philippines;
    All these keywords.

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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