Varying Elasticities and Forecasting Performance
Article first published online: 1 OCT 2013
Copyright © 2013 John Wiley & Sons, Ltd.
International Journal of Tourism Research
How to Cite
Smeral, E. and Song, H. (2013), Varying Elasticities and Forecasting Performance. Int. J. Tourism Res.. doi: 10.1002/jtr.1972
- Article first published online: 1 OCT 2013
- Manuscript Accepted: 28 AUG 2013
- Manuscript Revised: 31 JUL 2013
- Manuscript Received: 28 JAN 2013
- business cycle;
- asymmetric income and price effects;
- time-varying parameter model;
- forecasting error
This study assumes that tourists' demand reactions to income and price changes are asymmetric at different phases of the business cycle. In order to test this hypothesis, we analyzed the demand for international tourism in five source markets using a modified growth rate (MGR) model. The empirical evidence demonstrates that income elasticity is indeed asymmetric across the business cycle in four source markets. In addition, asymmetric price effects were found for one source market. To compare forecasting performance, we also estimated a time-varying parameter (TVP) model. The results show that the MGR model generally outperforms the TVP model. Copyright © 2013 John Wiley & Sons, Ltd.