Imperfect Reversibility Of The International Air Transport Demand

Consumption behavior is always an important area in economic theoretical and empirical research.One of purposes to study the consumption behavior is to guide the formulation of demand function.Imperfect reversibility is an example of demand function developing which bases on the development of consumption behavior theory.After arranging the predecessors’ studies,this study decided to use the three series decomposition formulation,which was used in Gately(1992),and study the potential imperfect reversibility of air transport demand between the United States and Great Britain in this study.It should be mentioned that this study finds the limitations of imperfect reversibility test.The traditional imperfect reversibility test can only be suitable to the situation of same symbolic parameters.However,in this study it shows different symbol in the parameters’ estimation of exchange rate.As a development test,this paper tests the absolute value of parameters to replace the value of parameters test.After using the absolute value test,this study finds out the different conclusion that there are not shown the significant asymmetry with exchange rate between the US-Britain,US-England and US-Scotland international air transport markets.Finally,this study shows the imperfect reversibility with respect to air fare and exchange rate at the same time on air transport demand between the United States and Great Britain,including the asymmetry and hysteresis with air fare,hysteresis with exchange rate.This study also shows the different results of imperfect reversibility between the US-England market and US-Scotland market.However,the result shows no significant difference of imperfect reversibility between the US-England market and US-Britain market.