Estimation of tourism demand function for Australian destinations: a time-varying parameter approach

Abstract

The main purpose of this paper is to estimate the foreign tourism demand for Australia during 1976–2012. This study applies the time-varying parameter approach to tourism demand modelling. To this end, the behavioural change of tourists over time is traced using the Kalman filter approach. The findings show that the income elasticity, price elasticity, and habit formation have a steady declining trend over time. The elasticity of tourism demand with respect to the world per capita income is greater than that of the “cost of living” and “habit formation” indicators. The foreign tourism appears to be a luxury good and inelastic to the domestic prices.

Keywords::

• Australia
• Kalman filter
• tourism demand
• TVP approach

Notes

^1. Email: [email protected]

^2. Email: [email protected]