The Causality Analysis of Air Transport

Air transport is one of the most important industries in the world with its rapid growth, and direct and indirect contribution to the 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 boosts the demand for air transport. However, uncertainty in the 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 the World Bank dataset for OECD countries between the year of 2000 and 2013 is used in this study. We apply the 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 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.