JAPANESE DEMAND FOR TOURISM IN SINGAPORE: A COINTEGRATION APPROACH

This study uses the cointegration approach to derive the long-run log linear multiple regression equation to measure the income, price, and exchange rate elasticities of demand of the Japanese for tourism in Singapore. We then derive the short-run error correction model to examine the impact of several major catastrophic events. Results show that in the long run, the negative relative price elasticity of demand is the highest (-4.27), followed by the positive (1.74) exchange rate elasticity and positive (1.43) income elasticity. This means that Japanese demand for tourism in Singapore is most affected by prices, followed by exchange rates, and then by incomes. Results also show that in the short run, the 1991 Gulf War and the September 11 terrorist attacks in 2001 also had significant negative impacts, but the 1973-1974 and 1979 oil crises and the Asian Financial Crisis from 1997 to 1998 did not, suggesting that Japanese tourists do not seem to be deterred by economic events that do not directly affect them, but they are very safety conscious.