Co-Integration and Error Correction Estimation to Forecast Tourism in El Salvador

Abstract

ABSTRACT Using co-integration and error correction models, the objective of this study was to systematically analyze the factors affecting the international tourism demand for El Salvador. The results indicate that the degree of responsiveness of tourist arrivals to El Salvador due to a change in income is elastic and quite differs from country to country. Residents from Honduras appeared to be less responsive to prices than residents from the other origin countries. The dynamic specification of error correction models further confirms the majority of the results obtained in the co-integration relationships. The findings are useful for private developers and public tourism planners in El Salvador. Marketing of specific tourism attributes could enable El Salvador to gain comparative advantage over its competitors. Keywords: Tourism demandco-integrationerror correction modelselasticity valuesdeveloping countriespolicy Acknowledgments The author would like to thank the two anonymous reviewers and the editor for their helpful comments and suggestions on an earlier draft of this article. All errors are the author's.