Comparison of Econometric Modelling of Demand for Domestic and International Tourism: Swedish Data

Abstract

The purpose of this paper is to identify functions for the domestic and international demand for tourism in the objective 6 region in Sweden (SW:6), in order to understand how tourism demand relates to the key macroeconomic variables and other variables such as real income, nominal and real exchange rate, price level and the Chernobyl nuclear disaster. An econometrics model is used to estimate the domestic tourism demand in SW:6. Monthly data for the period 1980–1998 are used. The results do not indicate any statistically significant effect of income, exchange rate or the Chernobyl nuclear disaster on the domestic tourism demand. Meanwhile, the consumer price index (CPI) and weather condition variables are found to have a rather significant effect on the domestic tourism demand. In this paper we also use a cointegration analysis to estimate the long-term relationship between monthly flows to SW:6 from the USA, the UK, Germany, Finland, Norway and Denmark, and factors such as income, CPI and exchange rate that influence arrivals. Monthly time series data for the period 1980–1998 are also used for this purpose. The estimated model does not indicate any statistically significant effect of the Chernobyl nuclear accident and the Gulf war on international tourism demand; on the other hand, significant effects of income, exchange rate and CPI on international tourism demand are found. The estimation and diagnostic testing strategy supports the specification of both models. When comparing these two parts of the study, regarding the domestic demand for tourism, we found the CPI, lags of the dependent variable and several of the monthly dummy variables that stand for the seasonal effects, to have significant effects on the number of visitors. On the other hand, we find income, exchange and CPI have a great influence on international tourism demand.