A Panel Cointegration Analysis: Thailand’s International Tourism Demand Model

This paper sought to find the long-run relationships between international tourist arrivals in Thailand and economic variables such as GDP, cost of transportation and exchange rates for the period 1986 to 2007. Also this paper used five standard panel unit root tests such as LLC (2002) panel unit root test, Breitung (2000) panel unit root test, IPS (2003) panel unit root test, Maddala and Wu (1999), Choi (2001) panel unit root test, Handri (1999) panel unit root test. Moreover, the panel cointegration test based on Pedroni residual cointegration tests, Kao residual cointegration tests and Johansen fisher panel cointegration test were used to test in panel among the variables. The FMOLS estimator was used to find the long-run relationship of the international tourism demand model for Thailand. The long-run results indicated that growth in income (GDP) of Thai’s Asia major tourist source markets has a positive impact on international tourist arrivals to Thailand. The empirical data implies that when the GDP of Asia major international tourist source markets such as Malaysia, Japan, Korea, China, Singapore, Taiwan increases by 1% then the number of international tourist arrivals to Thailand increases by 1.46%. In addition, when Thailand’s currency strengthens by 1% in comparison to the currencies of the above countries, then the number of international tourist arrivals to Thailand from those countries increases by 0.74%.