The causality analysis of air transport and socio-economics factors: the case of OECD countries

Abstract

Air transport is one of the most important industries in the world with its rapid growth, and direct and indirect contribution to world economy. In other words, GDP, tourism and employment are the key factors causing that growth in air transport and an increase in those factors boost the demand for air transport. However, uncertainty in economy, rising unemployment and increased terrorist attacks towards tourism would be a big threat to the growth of air transport in the future. To understand the importance of the mentioned factors, we first aim to apply an econometric approach which is panel Granger causality analysis. To achieve that, data from World Bank data set for OECD countries between the year of 2000 and 2013 is used in this study. We apply Pesaran CDLM test and Friedman’s test which are preferred when the number of units (N) is higher than the time (T) to test cross-sectional dependence and we then perform Granger causality analysis in order to see whether there is a causal relationship (unidirectional or bidirectional) or not among air transport, tourism, economic growth and employment.

Econometric results indicate that there is a unidirectional short run causal relationship between economic growth, tourism, employment and air transport and that those factors play an important role in the growth of air transport. In this paper, we also aim to discuss the future challenges for air transport within the frame of econometric results and statistical analysis.