Identifying Long-run Cointegrating Relations: An Application to the Hawaii Tourism Model

Cointegration analysis has gradually appeared in the empirical tourism literature. However, the focus has been exclusively on the demand side, neglecting supply influences and risking endogeneity bias. One reason for this may be the difficulty identifying structural relationships in a system setting. We estimate a demand-supply model of Hawaii tourism using a theory-directed sequential reduction methodology suggested by Hall, Henry, and Greenslade (2002). The resulting model illustrates the viability of such an approach as well its challenges.

Published: “Modeling Tourism: A fully identified VECM approach”, with Byron Gangnes and Ting Zhou, International Journal of Forecasting, Vol. 25, 2009, 531-49.

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