Investigating causality in international air freight and business travel: The case of Australia

Abstract

Few studies have examined the link between air cargo and business travel, despite there being a generally accepted understanding that these two variables are inextricably related to each other. This paper examines the relationship between air cargo and business travel at the international level and analyses how these two variables are causally related. Moreover, we break down the sample into three major Australian states (New South Wales, Queensland, and Victoria), as each possesses a distinct flavour in trade and commerce. Utilising Granger causality methods, we have found evidence that there is a direct causal relationship between business travel and air cargo in the short run, and a bi-directional relationship in periods of 12 months and longer. The nature of the Granger causality at the state-level substantially differs from state to state, suggesting that the economic landscape of Australia’s local economy has a significant impact on the air cargo and business travel relationship.

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