Econometric evidence on the determinants of air transport in South Asian countries

摘要

Whilst South Asia presents substantive market potential with large, dense populations and significant growth in gross domestic product (GDP), the growth in air transport (freight and passenger) has been much less than in the developed world and very different across countries in this region. This paper examines the determinants of air transport demand in South Asian countries over 41 years (1973 to 2013) using fixed effects models as well as two step error correction mechanism (ECM). The results suggest that per capita income, industrialisation, foreign direct investment (FDI) play a vital role in determining air passenger demand. Income and fuel price are further found to be significant factors that influence air freight demand in South Asian countries. Moreover, short run and long run equilibrium relationship among the variables were investigated and our findings suggest a long run equilibrium relationship exist with a lag of five periods in the air passenger model and lag of one period in the air freight model. However, only industrialisation and FDI are stimulating the air passenger demand in the short run and no short run causal relationship is found between our set of independent variables and air freight demand.