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The bounds-test approach for co-integration between international tourist arrivals, per capita income and cost of living: the case of All Cyprus

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  • Vedat Yorucu
  • Ozay Mehmet

Abstract

Tourism is a major income earner for Cyprus, but the market is a divided destination. Since 1974 the country has been divided into the North and the South, each competing with one another in the same tourism market. For the first time, this empirical study investigates an island-wide tourism demand. Extending earlier work (Yorucu, 2001), All Cyprus tourism time series data covering 1980-2006 has been used in this article to estimate demand applying standard bounds-test approach for co-integration within a disaggregated framework. The results confirm a special long-run equilibrium relationship between Turkey/North Cyprus and Greece/South Cyprus. Thus, per capita tourist arrivals from Greece to South Cyprus and those from Turkey to North Cyprus are statistically significant with cost of living and per capita income variables. So long as incomes per capita increase in Turkey and Greece, a reunited All Cyprus will gain as one destination as Turkish and Greek citizens will become mobile island-wide.

Suggested Citation

  • Vedat Yorucu & Ozay Mehmet, 2011. "The bounds-test approach for co-integration between international tourist arrivals, per capita income and cost of living: the case of All Cyprus," Applied Economics Letters, Taylor & Francis Journals, vol. 18(14), pages 1327-1331.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:14:p:1327-1331
    DOI: 10.1080/13504851.2010.537616
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    References listed on IDEAS

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    1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    2. Salih Katircioglu, 2009. "Tourism, trade and growth: the case of Cyprus," Applied Economics, Taylor & Francis Journals, vol. 41(21), pages 2741-2750.
    3. N. Kulendran & Kenneth Wilson, 2000. "Is there a relationship between international trade and international travel?," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 1001-1009.
    4. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
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    Cited by:

    1. Balcilar, Mehmet & Kutan, Ali M. & Yaya, Mehmet E., 2017. "Financial integration in small Islands: The case of Cyprus," International Review of Economics & Finance, Elsevier, vol. 47(C), pages 201-219.
    2. Balcilar, Mehmet & Kutan, Ali M. & Yaya, Mehmet E., 2017. "Testing the dependency theory on small island economies: The case of Cyprus," Economic Modelling, Elsevier, vol. 61(C), pages 1-11.

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