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Modeling the supply and demand for tourism: a fully identified VECM approach

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Author Info
Allison Zhou (Department of Economics and University of Hawaii Economic Research Organization, University of Hawaii at Manoa)
Carl Bonham () (Department of Economics and University of Hawaii Economic Research Organization, University of Hawaii at Manoa)
Byron Gangnes (Department of Economics and University of Hawaii Economic Research Organization, University of Hawaii at Manoa)

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Abstract

Cointegration analysis has gradually appeared in the empirical tourism literature. However, the focus has been exclusively on the demand side, neglecting potentially-important supply-side influences and risking endogeneity bias. One reason for this omission may be the difficulty identifying structural relationships in a system setting. We estimate a vector error correction model of the supply and demand for Hawaii tourism using a theory-directed sequential reduction method suggested by Hall et al. (2002). We compare forecasts for the selected model and for two competing models. Diebold and Mariano (1995) tests for forecast accuracy demonstrate the satisfactory performance of this approach.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_07-17.pdf
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Publisher Info
Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200717.

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Length: 34 pages
Date of creation: 20 Jul 2007
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Handle: RePEc:hai:wpaper:200717

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Related research
Keywords: catastrophe; Cointegration; Vector error correction model; Identification; Tourism demand and supply analysis; Hawaii;

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism

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References listed on IDEAS
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    Other versions:
  5. Pesaran, M. H. & Smith, Ron P., 1998. "Structural Analysis of Cointegrating VARs," Cambridge Working Papers in Economics 9811, Faculty of Economics, University of Cambridge.
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  11. Copeland, Brian R, 1991. "Tourism, Welfare and De-industrialization in a Small Open Economy," Economica, London School of Economics and Political Science, vol. 58(232), pages 515-29, November. [Downloadable!] (restricted)
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  14. Bonham, Carl S & Gangnes, Byron, 1996. "Intervention Analysis with Cointegrated Time Series: The Case of the Hawaii Hotel Room Tax," Applied Economics, Taylor and Francis Journals, vol. 28(10), pages 1281-93, October. [Downloadable!] (restricted)
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  15. Perron, Pierre, 1990. "Testing for a Unit Root in a Time Series with a Changing Mean," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 153-62, April.
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  16. Greenslade, Jennifer V. & Hall, Stephen G. & Henry, S. G. Brian, 2002. "On the identification of cointegrated systems in small samples: a modelling strategy with an application to UK wages and prices," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1517-1537, August. [Downloadable!] (restricted)
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  21. Phillips, Peter C B, 1995. "Fully Modified Least Squares and Vector Autoregression," Econometrica, Econometric Society, vol. 63(5), pages 1023-78, September. [Downloadable!] (restricted)
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  22. Harvey, David I & Leybourne, Stephen J & Newbold, Paul, 1998. "Tests for Forecast Encompassing," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 254-59, April.
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  24. Saikkonen, Pentti, 1993. "Continuous Weak Convergence and Stochastic Equicontinuity Results for Integrated Processes with an Application to the Estimation of a Regression Model," Econometric Theory, Cambridge University Press, vol. 9(02), pages 155-188, April. [Downloadable!]
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