ARMAX modelling of international tourism demand

Christine Lim; Michael McAleer; Jennifer C H Min

doi:10.1016/j.matcom.2008.08.010

ARMAX modelling of international tourism demand

Math Comput Simul. 2009 May;79(9):2879-2888. doi: 10.1016/j.matcom.2008.08.010. Epub 2008 Sep 10.

Authors

Christine Lim¹, Michael McAleer², Jennifer C H Min³

Affiliations

¹ Department of Tourism and Hospitality Management, University of Waikato, Private Bag 3105, Hamilton, New Zealand.
² School of Economics and Commerce, University of Western Australia, Australia.
³ International Business Department, Ming Chuan University, Taipei, Taiwan, ROC.

Abstract

Box-Jenkins (1970) models are often used to capture the autoregressive moving average of past observations of tourist arrivals from Japan to Taiwan and New Zealand. However, other explanatory variables, such as real income in the origin country, have also affected the demand for international travel. The purpose of this paper is to use the ARMAX model to investigate the dynamic relationship between tourism demand and real income of Japan, and to compare the findings with the single-equation model. Unit root tests and diagnostics are performed before estimating the income elasticity of travel demand by Japan for New Zealand and Taiwan based on seasonally unadjusted quarterly data for 1980(1) to 2004(2). The empirical results of the ARMAX model support the economic theory that the demand for international travel is positively related to income of the origin country.

Keywords: ARMAX modelling; Income elasticities; International tourism demand; New Zealand; Taiwan.