Long-run relationship between economic growth and passenger air transport in Mexico

Abstract

Air transport is a strategic factor that can play a key role in facilitating economic development, particularly in developing countries and in enhancing long-term economic growth. Conversely, the economic growth of a country can also have significant effects on air transport expansion. This paper analyzes the dynamic relationship between Mexican air transport (from the perspective of passengers’ movement) and economic growth. By applying nonlinear techniques, we explore whether air transport leads -on the long run- to economic growth, or, alternatively, economic expansion drives air transport growth, or indeed a bi-directional relationship exists between the two variables. To this end, non-parametric cointegration and non-parametric causality test are applied to quarterly data of GDP and air passengers in Mexico for the period 1995-2013. Our results show that we cannot reject the existence of a linearity relationship between air transport and economic growth. The nonparametric causality tests, confirm bidirectional causality between transport and growth. Finally, the paper compares the results of the nonlinear approach with those obtained by using the traditional linear methodology.