Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
Does Air Transport Development Promote Economic
Growth In South Asia? A Panel Data Analysis
Mahbubul Hakim* and Rico Merkert
This paper aims to examine the causal relationships between i) air passenger traffic
and economic growth and ii) air freight volume and economic growth in South Asia.
We use a panel consisting of traffic and economic data from all South Asian countries
over a period of 41 years (1973– 2013). It has been well established that aviation has
generally a strong positive impact on economies, but it is questionable to what extend
this applies to the South Asian context where growth rates are on average higher
than in more developed regions. What’s more it is interesting to analyse whether
economic growth has an impact on aviation too. If that is the case then this
bidirectional relationship should be accounted for in policy making both short and long
term. The heart of the the paper are panel unit root tests for both, Johansen’s
cointegration and Granger causality. We first test for cointegreation in the
relationships using the Johanesen-Juselius method followed by auto-regressive
distributed lag models. Once we have established the presence of cointegration, we
employ various Granger causality tests to test for short run, long run and joint
causality between aviation and economic growth in South Asian countries. Our
findings are expected to guide policy making in the South Asian context, as the
existence or non-existence of the relationships and also their direction can inform
decision makers on the value and likelihood of certain transport or economic
development initiatives.
Keywords: Air passenger traffic, Air freight volume; Economic growth; Causal relationship,
South Asia.
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Md. Mahbubul Hakim*, Institute of Transport and Logistics Studies, St James Campus C13 (173-175
Phillip St), University of Sydney Business School, The University of Sydney, NSW 2006, Australia,
E-mail: m.hakim@econ.usyd.edu.au
Dr. Rico Merkert, Institute of Transport and Logistics Studies, St James Campus C13 (173-175 Phillip
St), University of Sydney Business School, The University of Sydney, NSW 2006, Australia, E-mail:
rico.merkert@sydney.edu.au
*corresponding author