The nonlinear relationship between air transport development and economic growth: the cases of Chile and Uruguay

Abstract

The relationship between air transport development and economic growth has been recently analysed in the economic literature. Most of the empirical research focuses in the identification of linear linkages and causalities between these variables (controlling or not by other macro variables). Previous research performed for a set of Latin-American countries (Argentina, Brazil, Chile and Uruguay) suggests that for the last two countries, nonlinear long-run cointegration relationships exist between transport and economic growth. The present study focuses on the identification of the nonlinearities underlay in those relationships and proposes a model to represent them. The methodology used in this paper combines cointegration concepts with asymmetric adjustment threshold models. In both cases, the nonlinearity is modelled on the dynamics of the adjustment to the long-run cointegration path between the variables, from transitory situations of disequilibrium. It is shown that M-TAR adjustment mechanism to the long-run equilibrium is suitable to describe the long-run relationship in the case of Uruguay. However, in the case of Chile, the evidence founded is not clear in favour to a nonlinear model with asymmetric adjustment.