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Time Varying Parameter and Fixed Parameter Linear AIDS: An Application to Tourism Demand Forecasting

Li, G, Song, H and Witt, SF (2006) Time Varying Parameter and Fixed Parameter Linear AIDS: An Application to Tourism Demand Forecasting International Journal of Forecasting, 22 (1). 57 - 71. ISSN 0169-2070


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This study develops time varying parameter (TVP) linear almost ideal demand system (LAIDS) models in both long-run (LR) static and short-run error correction (EC) forms. The superiority of TVP-LAIDS models over the original static version and the fixed-parameter EC counterparts is examined in an empirical study of modelling and forecasting the demand for tourism in Western European destinations by UK residents. Both the long-run static and the short-run EC-LAIDS models are estimated using the Kalman filter algorithm. The evolution of demand elasticities over time is illustrated using the Kalman filter estimation results. The remarkably improved forecasting performance of the TVP-LAIDS relative to the fixed-parameter LAIDS is illustrated by a one-year- to four-years-ahead forecasting performance assessment. Both the unrestricted TVP-LR-LAIDS and TVP-EC-LAIDS outperform the fixed-parameter counterparts in the overall evaluation of demand level forecasts, and the TVP-EC-LAIDS is also ranked ahead of most other competitors when demand changes are concerned.

Item Type: Article
Divisions : Faculty of Business, Economics and Law > Hospitality and Tourism Management
Authors :
Date : January 2006
Identification Number : 10.1016/j.ijforecast.2005.03.006
Uncontrolled Keywords : linear almost ideal demand system (LAIDS), error correction, time varying parameter (TVP), Kalman filter, tourism demand, forecasting, ERROR-CORRECTION, UNITED-STATES, INTERNATIONAL TOURISM, ECONOMETRIC-MODELS, FOOD-CONSUMPTION, MARKET SHARES, SYSTEM, COINTEGRATION, GREECE, ELASTICITIES
Additional Information : This is an author-prepared PDF of an article published in International Journal of Forecasting 22,57–71.
Depositing User : Mr Adam Field
Date Deposited : 27 May 2010 14:37
Last Modified : 23 Sep 2013 18:31

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