| This study explored whether the Purchasing Power Parity (PPP) index can be used in the Almost Ideal Demand System (AIDS) method. The researcher developed two AIDS models with different price variables---one that used the PPP index and the other that included a conventional Consumer Price Index (CPI). Three criteria were used to compare estimation results: statistical significance of coefficient estimates, adjusted R2, and the Durbin-Watson (DW) statistics. A fourth criterion involved comparing each model's performance in tourism demand forecasting.;Eight European tourism destinations were involved in this study: Austria, France, Germany, Italy, Spain, Switzerland, the UK, and Others. These eight countries were chosen in order to represent European tourism as a whole. Five European countries were selected as tourism origins: France, Germany, Italy, Spain, and the UK. These countries seemed to represent a cross section of variation in tourism demand throughout Europe.;The estimation and forecasting results of the models indicated there were variations among the five different origin countries' AIDS models. Based on the quantitative assessment in terms of the four comparison criteria, the PPP model outperformed the CPI model in Italy and Spain whereas the opposite is true for the other three origin countries. Study results may suggest that researchers need to consider an alternative price variable to the conventional CPI-based price variable in future studies of international tourism demand. |
