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Estimating Demand Elasticities in Non-Stationary Panels: The Case of Hawai‘i Tourism

It is natural to turn to the richness of panel data to improve the precision of estimated tourism demand elasticities. However, the likely presence of common shocks shared across the underlying macroeconomic variables and across regions in the panel has so far been neglected in the tourism literature. We deal with the e ffects of cross-sectional dependence by applying Pesaran’s (2006) common correlated e ffects estimator, which is consistent under a wide range of conditions and is relatively simple to implement. We study the extent to which tourist arrivals from the US Mainland to Hawaii are driven by fundamentals such as real personal income and travel costs, and we demonstrate that ignoring cross-sectional dependence leads to spurious results. 

Published Version: Fuleky, P., Q. Zhao , C. Bonham. 2013. Estimating demand elasticities in non-stationary panels: The case of Hawaii tourism. Annals of Tourism Research. In Press.

WORKING PAPER


Annual Hawaii Forecast: Expansion to Strengthen Despite Washington Worries

Posted August 9, 2013 | Categories: Forecasts

Hawaii is headed toward a strong expansion path. While federal tax increases and the spending sequester have weighed on growth in the year’s first half, construction and service sector progress will maintain forward momentum. Incremental contributions from tourism will be more limited as that industry pushes up against capacity constraints. The Islands are poised for several years of moderately rapid growth that will bring measurable improvements for many local families.

A summary of this forecast is available as a service to the public. For more detailed analysis, subscribe to UHERO's Forecast Project.

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The Impact of Marriage Equality on Hawai′i’s Economy and Government: An Update After the U.S. Supreme Court’s Same-Sex Marriage Decisions

The U.S. Supreme Court’s decisions in the two same-sex marriage cases have substantially increased the short-term and medium-term benefits that could accrue to Hawai‘i if the Hawai‘i State Legislature enacts legislation allowing same-sex marriages to begin in Fall 2013 or early in 2014.

RESEARCH PAPER


Forecasting with Mixed Frequency Factor Models in the Presence of Common Trends

We analyze the forecasting performance of small mixed frequency factor models when the observed variables share stochastic trends. The indicators are observed at various frequencies and are tied together by cointegration so that valuable high frequency information is passed to low frequency series through the common factors. Diff erencing the data breaks the cointegrating link among the series and some of the signal leaks out to the idiosyncratic components, which do not contribute to the transfer of information among indicators. We find that allowing for common trends improves forecasting performance over a stationary factor model based on di fferenced data. The common-trends factor model" outperforms the stationary factor model at all analyzed forecast horizons. Our results demonstrate that when mixed frequency variables are cointegrated, modeling common stochastic trends improves forecasts.

Published Version:  Peter Fuleky and Carl S. Bonham (2015). FORECASTING WITH MIXED-FREQUENCY FACTOR MODELS IN THE PRESENCE OF COMMON TRENDS. Macroeconomic Dynamics, 19, pp 753-775. doi:10.1017/S136510051300059X.  

Working Paper


Sumner La Croix on PBS Hawaii Insights: Is Hawaii Losing Its Middle Class?

Is Hawaii losing its middle class? Paradise comes at a price, with rising food and housing costs, a challenged public school system and few professional opportunities in a tourist-driven economy. UHERO's Sumner La Croix joins Malia Mattoch and guests on Insights on PBS Hawaii to discuss how these issues impact the islands' middle class residents. 

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UHERO on Bytemarks Cafe: The UHERO Dashboard Project

Posted June 13, 2013 | Categories: Media

UHERO Executive Director and Professor of Economics Carl Bonham and Database Manager Ben Trevino appeared on Bytemarks Cafe where they discussed the UHERO Dashboard Project, a data dashboard development project running throughout the month of June. The dashboard is being designed with input from the community, to help people better understand Hawaii's economy.

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UHERO County Forecast: Growth Accelerates Statewide

Posted May 24, 2013 | Categories: Forecasts

2012 was another year of strong tourism gains for Hawaii’s counties, and a year when significant growth spread to much of the broader economy. Oahu continues to be further along in recovery, but the Neighbor Islands are catching up fast. This year, economic growth will quicken, with an impetus from construction, which has turned the corner and is poised for a strong pickup in activity. The broadening recovery together with modest inflation will drive growth in real incomes across the counties over the next several years.

A summary of this forecast is available as a service to the public. For more detailed analysis, subscribe to UHERO's Forecast Project.

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The Economic Impact of the University of Hawai'i System

The University of Hawai‘i (UH) generates economic activity through its purchases from local businesses, its payment to its employees, and spending by students and visitors. This report estimates UH’s total economic activity in the state of Hawai‘i in fiscal year 2012. Following a standard approach, we define economic impact to be the direct, indirect, and induced economic activities generated by the university’s spending in the state economy.

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Potential Benefits, Impacts, and Public Opinion of Seawater Air Conditioning in Waikïkï

This report provides a summary of an investigation by the University of Hawai‘i Sea Grant College Program into the viability and effectiveness of installing a seawater air conditioning district cooling system in Waikīkī. Seawater air conditioning (SWAC) harnesses the cooling properties of cold seawater to provide cool air for air conditioning purposes. In doing so, SWAC reduces the amount of electricity needed for air conditioning. SWAC is particularly relevant to Hawai‘i for two reasons: first, the proximity of deep, cold, ocean water to areas of high population make Hawai‘i an obvious location for implementing the technology; and secondly, with approximately 90% of its electricity generated from fossil fuels, Hawai‘i is the most fossil fuel dependent state in the nation. Unlike the rest of the U.S., where coal, natural gas, and nuclear power are called upon to meet a substantial proportion of the electricity demand, Hawai‘i relies heavily on residual fuel oil (the by-product of refining crude oil for jet fuel, gasoline, and other distillates). As a result, Hawai‘i has very high electricity prices compared to the rest of the country. SWAC has the potential to both cut the cost of air conditioning and reduce the amount of harmful emissions that are released as a by-product of generating electricity from fossil fuels.


Seawater air conditioning works by pumping cold (44-45°F), deep (1,600-1,800 feet) seawater into a cooling station (Figure 1). Here, the cold seawater is used to chill fresh water flowing in nearby pipes. The chilled fresh water is then piped into hotels for cooling purposes while the seawater (slightly warmed to 53-58°F) is pumped back into the ocean at a shallower depth (120-150 feet).

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Hawaii Construction Forecast: Construction Upswing Picks Up Speed

Posted March 29, 2013 | Categories: Forecasts

Construction turned the corner in Hawaii last year after five straight years of contraction. We are now seeing impressive gains in percentage terms for private building permits, although these are starting from very depressed levels. Home building, retail and visitor industry upgrades, the ongoing boom in photovoltaic installation, and, yes, rail, will combine to drive a strong industry expansion over the next several years.

A summary of this forecast is available as a service to the public. For more detailed analysis, subscribe to UHERO's Forecast Project.

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Sustainable Development and the Hawaii Clean Energy Initiative: An Economic Assessment

 The connection between the emerging field of sustainability science and the economics of sustainable development has motivated a line of interdisciplinary research inspired by the notion of “positive sustainability.” This notion is founded on three principles or pillars: (1) adopting a complex systems approach to modeling and analysis, integrating natural resource systems, the environment, and the economy; (2) pursuing dynamic efficiency, that is, efficiency over both time and space in the management of the resource-environment-economy complex to maximize intertemporal well-being; and (3) enhancing stewardship for the future through intertemporal equity, which is increasingly represented as intergenerational neutrality or impartiality. This paper argues that the Hawaii Clean Energy Initiative (HCEI) fails to satisfy all three pillars of sustainability, and consequently fails to achieve the "sustainability criterion" put forward by Arrow, Dagupta, Daily et al: that total welfare of all future generations not be diminished. HCEI shrinks the economy, contributes negligibly to reduction of global carbon emissions, and sparks rent seeking activity (pursuit of special privilege and benefits) throughout the State of Hawaii.

WORKING PAPER


Hawaii Economists Consider Impact Of Minimum Wage Increase

Two proposed bills in the legislation have the support of Governor Abercrombie, and could bump up Hawaii current minimum wage to $8.75 an hour. HPR's Molly Solomon reports on the potential impacts. 

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Brief: Should we increase Hawaii's minimum wage?

A higher minimum wage is unlikely to accomplish the stated goal of raising the living standards of the working poor. And given Hawaii’s highly service oriented economy, the negative impact of an increased minimum wage may have a larger impact than in other states.

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Carl Bonham Discusses Latest State Forecast Update on The Conversation

Posted February 19, 2013 | Categories: Media

UHERO Executive Director and Professor of Economics Carl Bonham goes on The Conversation on HPR to talk about the latest State Forecast Update, including discussion regarding current and forecasted federal spending cuts, construction jobs, and the future of tourism.

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UHERO State Forecast Update: Expansion Shifts Into Higher Gear

Posted February 15, 2013 | Categories: Forecasts

2012 marked a transition to healthier growth. Room for rapid tourism gains is now limited, but other sectors will pick up the pace.

A summary of this forecast is available as a service to the public. For more detailed analysis, subscribe to UHERO's Forecast Project.

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