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Using alternative methods to estimate the determinants of cross-border trips

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  • Livio Di Matteo

Abstract

The relationship between quarterly same day automobile trips by Canadians to the United States and the real exchange rate over the period 1979 - 95 is estimated using the parametric technique Ordinary Least Squares (OLS) and the nonparametric technique Locally Weighted Scatterplot Smoothing (LOWESS). The results suggest that there are important differences in the estimates generated across the two techniques. The nonparametric approach generates an inverse J-curve relationship between the two variables which implies that linear OLS estimates can yield substantial under-and overestimates of the dependent variable as the real exchange rate varies. This can have implications for applied researchers attempting to estimate models of tourism demand for forecasting purposes. At the very least, the nonparametric approach can help suggest a more flexible parametric functional form for multivariate regression that better reflects the data.

Suggested Citation

  • Livio Di Matteo, 1999. "Using alternative methods to estimate the determinants of cross-border trips," Applied Economics, Taylor & Francis Journals, vol. 31(1), pages 77-88.
    • Handle: RePEc:taf:applec:v:31:y:1999:i:1:p:77-88
    DOI: 10.1080/000368499324570
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    References listed on IDEAS

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    1. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-229, April.
    2. Suits, Daniel B & Mason, Andrew & Chan, Louis, 1978. "Spline Functions Fitted by Standard Regression Methods," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 132-139, February.
    3. Pagan, Adrian R & Wickens, M R, 1989. "A Survey of Some Recent Econometric Methods," Economic Journal, Royal Economic Society, vol. 99(398), pages 962-1025, December.
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    Cited by:

    1. Jeffrey R. Campbell & Beverly Lapham, 2004. "Real Exchange Rate Fluctuations and the Dynamics of Retail Trade Industries on the U. S.-Canada Border," American Economic Review, American Economic Association, vol. 94(4), pages 1194-1206, September.
    2. Desiderio Romero-Jordán & Marta Jorge Garc𫑉n鳠 & Santiago Álvarez Garc𨀍, 2013. "The impact of fuel tourism on retailers’ diesel price in Spanish neighbouring regions," Applied Economics, Taylor & Francis Journals, vol. 45(4), pages 407-413, February.

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