A Cointegration Analysis of Air Travel Demand: The Case of International Air Travel Demand Between Morocco and European Union

Abstract

Europe is the most important source of tourism for Morocco. The purpose of this paper is to investigate the short and long-run determinants of air travel demand from European Union to Morocco. In order to analyze the air travel demand, we used the relevant macroeconomic variables, such as the origin countries' income, i.e. Europe and the real exchange rate between the origin and host country. Annual data from the two countries, covering the period 1970-2012, are used. The ADF unit root test was used to examine the degree of variables integration. The Johansen maximum likelihood procedure was used to determine the number of co-integrating vectors in the VAR model. An error correction model was estimated to explain the air travel demand determinants between Morocco and the EU both in short and long-run. The estimated error correction model provides strong evidence that European GDP, real exchange rate fluctuations and regulatory environment are the main factors affecting air travel demand in Morocco.