Download Modelling Tourism Demand in Japan Using Cointegration and Error correction Model:

Modelling Tourism Demand in Japan Using Cointegration
and Error correction Model
Omorogbe Joseph Asemota1
Department of Economic Engineering, Kyushu University.
Abstract
This paper investigates uses the cointegration and error correction modeling technique to
investigate the long-run and short-run relationship between visitors arrival in Japan from five
major Western countries. The Augmented Dickey-Fuller (ADF) test is used to determine the
order of integration of the series, while we employ the Engle-Granger cointegration
procedure to test for the presence of long-run relationship. The results of the cointegration
indicate that there is a long-run relationship between tourists’ arrivals and the causal
variables. Both the short-run and long –run models indicate that GDP per capita in tourists’
origin country is the most significant factor influencing the inflow of visitors into Japan. The
price elasticity and price of tourism in competing destinations are found to be significant is
some cases. The long-run and error correction models clearly indicate that the U.S.A has the
highest fidelity to tourism in Japan among the five Western countries considered. Policy
recommendations were also made to decision-makers and planners involves in development
of tourism in Japan.
Keywords: Cointegration, Error correction model, Tourism demand, Unit roots.
1
Graduate School of Economics, Department of Economic Engineering, Kyushu University, 6-19-1 Hakozaki,
Higashi-ku, Fukuoka, 812-8581, Japan. Email: [email protected] and [email protected]