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VECTOR AUTOREGRESSION AND VECTOR ERROR CORRECTION MODELS: APPLICATION TO ETHIOPIAN AIR LINE DATA 

Author(s) : Thomus Soloman and M. K. Sharma
Pages : [201] - [256]
Received : January 10, 2018; Revised April 27, 2018

Abstract

Ethiopian Airline is playing a leading role in transforming Ethiopia into a world class aviation hub of the African continent not only for trade and business but also for the tourism. For the continual of its success, forecasting air travel demand may play a crucial role for an overall effective planning.

 

The present article has utilized a monthly data from January 2009 up to December 2013 to build vector autoregression (VAR) and VECM models, and also to know the effect of a study target variable Load Factor (LF) to Passenger Revenue (PR), Block Hours (BH), and Distance Flown (DF) at international level.

 

The VECM (1) shown that the Load Factor (as a measure of travel demand) is Granger caused by all variables in the short-run except Passenger Revenue and significantly explained by all variables in the long-run. 

Keywords

load factor, vector autoregression (VAR), cointegration, vector error correction model (VECM), forecasting.