A Panel Unit Root and Panel Cointegration Test of the Modeling International Tourism Demand in India

This paper sought to find the long-run relationships between international tourist arrivals in India with economic variables such as GDP, transportation costs and the exchange rate for the period from 2002-2006. The cointegration techniques used was based on Panel Cointegration Test as well as both the OLS estimator and DOLS estimator were used to find long-run relationship of the international tourism demand model for India. This paper used the five standard method test for Panel Unit Root Tests such as Levin, Lin and Chu (2002), Breitung (2000), Im, Pesaran and Shin (2003), Maddala and Wu (1999) and Choi (2001) and Handri (1999). The long-run results indicate that growth in income (GDP) of India’s major tourist source markets has a positive impact on international visitor arrivals to India. These empirical results imply that when GDP of international major tourist source market such as England, America, Canada, France, German, Japan, Malaysia, Australia, Singapore and Korea increasing 1% then the number of international visitor arrivals to India increasing about 3% to 4%. As well as when transportation cost of these country increasing 1% then the number of international visitor arrivals to India increasing about 0.3% to 0.6%. Finally when the value of India’s currency strong than the value of these country’s currency increasing 1% then the number of international visitor arrivals to India decreasing 0.003% to 0.006%. Furthermore mostly findings were consistent with economic theory and the implications of the model can be use for policy making