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A Comparison of Forecasting Performance of PPML and OLS estimators: The Gravity Model in the Air Cargo Market

Year 2023, Issue: 39, 112 - 128, 27.12.2023
https://doi.org/10.26650/ekoist.2023.39.1310639

Abstract

Using international air cargo data from Turkey, this study compares the forecast performance of three different approaches in the air transport literature for the basic gravity model parameter estimation. The first approach uses ordinary least squares to estimate the gravity model, which is frequently utilized in air transport literature. The second approach, like the first, employs the log-linear estimate technique, but unlike the first, it adds a small amount to the observations with a zero-valued dependent variable and includes them in the analysis. The third method is to estimate the gravity model using the Poisson pseudo maximum-likelihood estimator, which is an alternative to the ordinary least square estimator. The forecast performance of the models developed after estimating the equation with three different approaches was compared with error metrics and the Diebold-Mariano test. As a result of the study, the Poisson pseudo-maximum-likelihood estimator was observed to be the estimator with by far the best forecast performance for the total amount of cargo carried. However, the forecast performance of models differs for some cities.

References

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  • Baier, S., & Bergstrand, J. H. (2010). Approximating general equilibrium impacts of trade liberalizations using the gravity equation. The Gravity Model in International Trade, 88-134. google scholar
  • Baker, D., Merkert, R., Kamruzzaman, M., 2015. Regional aviation and economic growth: cointegration and causality analysis in Australia. J. Transport Geogr. 43, 140-150. google scholar
  • Becker, K., Terekhov, I., & Gollnick, V. (2018). A global gravity model for air passenger demand between city pairs and future interurban air mobility markets identification. In 2018 aviation technology, integration, and operations conference (p. 2885). google scholar
  • Becker, K., Terekhov, I., Gollnick, V., 2018. A global gravity model for air passenger demand between city pairs and future interurban air mobility markets identification. In 2018 aviation technology, integration, and operations conference pp-2885. google scholar
  • Ben-Akiva, M., Lerman, S. R., 1985. Discrete Choice Analysis: Theory and Application to travel demand VOL.9. MIT press. google scholar
  • Blume, H., Daimler-Benz Aerospace AG., 1995. World Market Forecast 1995-2014 for Civil Air Transport, Muenchen, Germany. google scholar
  • Choi, J. H. 2023. A Study on The Change in The Significance of GDP As a Determinant of Air Demand-Discussions on Brand-New Air Transport Items. Transport Policy, 133, 186-197. google scholar
  • Cristea, A.D., Hillberry, R., Mattoo, A., 2015. Open skies over the Middle East. The World Economy, 38 (11), 1650-1681. google scholar
  • Danilov, D. L., 1997. Principal components in time series forecast. Journal of computational and graphical statistics, 6(1), pp. 112-121. google scholar
  • Desai, J., Srivathsan, S., Lai, W. Y., Li, L., Yu, C., 2023. An optimization-based decision support tool for air cargo loading. Computers & Industrial Engineering, 175, 108816. google scholar
  • DHMI, 2020. Annual Statistical Yearbook publications of the General Directorate of State Airports Authority, Ankara. google scholar
  • DHMI, 2021. Aircraft, passenger, freight series and forecast. Retrieved from: https://www.dhmi.gov.tr/Sayfalar/EN/Statistics.aspx. Access Date: 01.06.2021. google scholar
  • Diebold, F.X. and R.S. Mariano. (1995). Comparing predictive accuracy. Journal of Business and Economic Statistics, 13: 253-63. google scholar
  • Feng, B., Li, Y., & Shen, Z. J. M. (2015). Air cargo operations: Literature review and comparison with practices. Transportation Research Part C: Emerging Technologies, 56, 263-280. google scholar
  • Fernandes, E., & Pacheco, R. R. (2010). The causal relationship between GDP and domestic air passenger traffic in Brazil. Transportation Planning and Technology, 33(7), 569-581. google scholar
  • Fildes, R., Wei, Y., & Ismail, S. (2011). Evaluating the forecasting performance of econometric models of air passenger traffic flows using multiple error measures. International Journal of Forecasting, 27(3), 902-922. google scholar
  • Gillen, D., Hazledine, T., 2015. The economics and geography of regional airline services in six countries. Journal of Transport Geography, 46, 129-136. google scholar
  • Gomez-Herrera, E., 2013. Comparing alternative methods to estimate gravity models of bilateral trade. Empirical economics, 44(3), pp. 1087-1111. google scholar
  • Gomez-Herrera, E., 2013. Comparing alternative methods to estimate gravity models of bilateral trade. Empirical economics, 44(3), pp. 1087-1111. google scholar
  • Grosche, T., Rothlauf, F., Heinzl, A., 2007. Gravity models for airline passenger volume estimation. Journal of Air Transport Management, 13(4), 175-183. google scholar
  • Grosso, M. G., & Shepherd, B. (2011). Air cargo transport in APEC: Regulation and effects on merchandise trade. Journal of Asian economics, 22(3), 203-212. google scholar
  • Gül, H., Tatoğlu, F.Y., 2019. Turizm Talebinin Panel Çekim Modeli Çerçevesinde Analizi. Turizm Akademik Dergisi, 6 (1), pp. 49-60. google scholar
  • Hakim, M. M., & Merkert, R. (2016). The causal relationship between air transport and economic growth: Empirical evidence from South Asia. Journal of Transport geography, 56, 120-127. google scholar
  • Hazledine, T. (2017). An augmented gravity model for forecasting passenger air traffic on city-pair routes. Journal of Transport Economics and Policy (JTEP), 51(3), 208-224.7 google scholar
  • Hazledine, T., 2009. Border effects for domestic and international Canadian passenger air travel. Journal of Air Transport Management, 15 (1), 7-13. google scholar
  • Helpman, E., Melitz, M., & Rubinstein, Y. (2008). Estimating trade flows: Trading partners and trading volumes. The quarterly journal of economics, 123(2), 441-487. google scholar
  • Hwang, C. C., Shiao, G. C., 2011. Analyzing air cargo flows of international routes: an empirical study of Taiwan Taoyuan International Airport. Journal of Transport Geography, 19(4), pp. 738-744. google scholar
  • IGA, 2021. Kargo ve Lojistik Merkezi. Retrieved from: https://www.igairport.com/tr/istanbul-havalimani/kargo-ve-lojistik-merkezi. Access Date: 21.06.2021. google scholar
  • Isard, W., Peck, M. J., 1954. Location theory and international and interregional trade theory. The Quarterly Journal of Economics, pp. 97-114. google scholar
  • Kanafani, A., 1983. Transportation demand analysis, New York. google scholar
  • Law, R., Au, N., 1999. A neural network model to forecast Japanese demand for travel to Hong Kong. Tourism Management, 20(1), pp. 89-97. google scholar
  • Maddala, G. S. (1983). Methods of estimation for models of markets with bounded price variation. International Economic Review, 361-378. google scholar
  • Matsumoto, H. (2004). International urban systems and air passenger and cargo flows: some calculations. Journal of Air Transport Management, 10(4), 239-247. google scholar
  • Matsumoto, H. (2007). International air network structures and air traffic density of world cities. Transportation Research Part E: Logistics and Transportation Review, 43(3), 269-282. google scholar
  • Matsumoto, H., & Domae, K. (2018). The effects of new international airports and air-freight integrator’s hubs on the mobility of cities in urban hierarchies: A case study in East and Southeast Asia. Journal of Air Transport Management, 71, 160-166. google scholar
  • Matsumoto, H., & Domae, K. (2019). Assessment of competitive hub status of cities in Europe and Asia from an international air traffic perspective. Journal of Air Transport Management, 78, 88- google scholar
  • Matsumoto, H., Domae, K., & O’Connor, K. (2016). Business connectivity, air transport and the urban hierarchy: A case study in East Asia. Journal of Transport Geography, 54, 132-139. google scholar
  • Nam, K., Schaefer, T., 1995. Forecasting international airline passenger traffic using neural networks. The Logistics and Transportation Review, 31(3), pp. 239-252. google scholar
  • Santos, S., Tenreyro, S., 2006. The log of gravity. Review of Economics and Statistics, 88, pp. 641-658. google scholar
  • Schneider, H. (1986). Truncated and censored samples from normal populations. Marcel Dekker, Inc.. google scholar
  • Schultz, R. L. (1972). Studies of Airline Passenger Demand: A Review. Transportation Journal, 48-62. google scholar
  • Sun, S., Lu, H., Tsui, K. L., & Wang, S. (2019). Nonlinear vector auto-regression neural network for forecasting air passenger flow. Journal of Air Transport Management, 78, 54-62. google scholar
  • Suryani, E., Chou, S. Y., & Chen, C. H. (2010). Air passenger demand forecasting and passenger terminal capacity expansion: A system dynamics framework. Expert Systems with Applications, 37(3), 2324-2339. google scholar
  • Tatoğlu, F.Y., 2018. İleri panel veri analizi. Basım. İstanbul: Beta Yayıncılık. google scholar
  • Tratar, L. F., & Strmcnik, E. (2016). The comparison of Holt-Winters method and Multiple regression method: A case study. Energy, 109, 266-276. google scholar
  • Van Bergeijk, P. A., & Brakman, S. (Eds.). (2010). The gravity model in international trade: Advances and applications. Cambridge University Press. google scholar
  • Westerlund, J., Wilhelmsson, F., 2011. Estima,ting the gravity model without gravity using panel data. Applied Economics, 43(6), pp. 641-649. google scholar
  • Wickham, R. R., 1995. Evaluation of forecasting techniques for short-term demand of air transportation. Cambridge, Mass.: Massachusetts Institute of Technology, Dept. of Aeronautics & Astronautics. Flight Transportation Laboratory, Massachusetts Institute of Technology, Massachusetts, USA. google scholar
  • World Bank, 2023. Air transport, freight. Retrieved from: https://data.worldbank.org/indicator/IS.AIR.GOOD.MT.K1?locations=TR (accessed 10 February 2023) google scholar
  • Yamaguchi, K., 2008. International trade and air cargo: Analysis of US export and air transport policy. Transportation Research Part E: Logistics and Transportation Review, 44(4), pp. 653-663. google scholar
  • Zhang, X., Zheng, Y., & Wang, S. (2019). A demand forecasting method based on stochastic frontier analysis and model average: An application in air travel demand forecasting. Journal of Systems Science and Complexity, 32(2), 615-633. google scholar
  • Zhang, Y., Findlay, C., 2014. Air transport policy and its impacts on passenger traffic and tourist flows. Journal of Air Transport Management, 34, 42-48. google scholar
  • Zhang, Y., Zhang, A., 2016. Determinants of air passenger flows in China and gravity model: Deregulation, LCC and high-speed rail. Jspeed rail. Journal of Transport Economics and ournal of Transport Economics and Policy, 50 (3), 287(3), 287-303.303. google scholar
Year 2023, Issue: 39, 112 - 128, 27.12.2023
https://doi.org/10.26650/ekoist.2023.39.1310639

Abstract

References

  • [dataset] TURKSTAT, 2021. Turkish Statistical Institute. Retrieved from: https://biruni.tuik.gov.tr/bolgeselistatistik/sorguSayfa.do?target=degisken (accessed 01 May 2021). google scholar
  • [dataset] World Bank, 2021. The World Bank. Retrieved from: https://data.worldbank.org/ (accessed 01 May 2021). google scholar
  • Alekseev, K. P. G., & Seixas, J. M. (2009). A multivariate neural forecasting modeling for air transport-preprocessed by decomposition: a Brazilian application. Journal of Air Transport Management, 15(5), 212-216. google scholar
  • Alekseev, K. P G., & Seixas, J. M. (2009). A multivariate neural forecasting modeling for air transport-preprocessed by decomposition: a Brazilian application. Journal of Air Transport Management, 15(5), 212-216. google scholar
  • Alexander, D. W., & Merkert, R. (2017). Challenges to domestic air freight in Australia: Evaluating air traffic markets with gravity modelling. Journal of Air Transport Management, 61, 41-52. google scholar
  • Alexander, D. W., & Merkert, R. (2021). Applications of gravity models to evaluate and forecast US international air freight markets post-GFC. Transport Policy, 104, 52-62. google scholar
  • Aydın, U., & Ülengin, B. (2022). Analyzing air cargo flows of Turkish domestic routes: A comparative analysis of gravity models. Journal of Air Transport Management, 102, 102217. google scholar
  • Baier, S., & Bergstrand, J. H. (2010). Approximating general equilibrium impacts of trade liberalizations using the gravity equation. The Gravity Model in International Trade, 88-134. google scholar
  • Baker, D., Merkert, R., Kamruzzaman, M., 2015. Regional aviation and economic growth: cointegration and causality analysis in Australia. J. Transport Geogr. 43, 140-150. google scholar
  • Becker, K., Terekhov, I., & Gollnick, V. (2018). A global gravity model for air passenger demand between city pairs and future interurban air mobility markets identification. In 2018 aviation technology, integration, and operations conference (p. 2885). google scholar
  • Becker, K., Terekhov, I., Gollnick, V., 2018. A global gravity model for air passenger demand between city pairs and future interurban air mobility markets identification. In 2018 aviation technology, integration, and operations conference pp-2885. google scholar
  • Ben-Akiva, M., Lerman, S. R., 1985. Discrete Choice Analysis: Theory and Application to travel demand VOL.9. MIT press. google scholar
  • Blume, H., Daimler-Benz Aerospace AG., 1995. World Market Forecast 1995-2014 for Civil Air Transport, Muenchen, Germany. google scholar
  • Choi, J. H. 2023. A Study on The Change in The Significance of GDP As a Determinant of Air Demand-Discussions on Brand-New Air Transport Items. Transport Policy, 133, 186-197. google scholar
  • Cristea, A.D., Hillberry, R., Mattoo, A., 2015. Open skies over the Middle East. The World Economy, 38 (11), 1650-1681. google scholar
  • Danilov, D. L., 1997. Principal components in time series forecast. Journal of computational and graphical statistics, 6(1), pp. 112-121. google scholar
  • Desai, J., Srivathsan, S., Lai, W. Y., Li, L., Yu, C., 2023. An optimization-based decision support tool for air cargo loading. Computers & Industrial Engineering, 175, 108816. google scholar
  • DHMI, 2020. Annual Statistical Yearbook publications of the General Directorate of State Airports Authority, Ankara. google scholar
  • DHMI, 2021. Aircraft, passenger, freight series and forecast. Retrieved from: https://www.dhmi.gov.tr/Sayfalar/EN/Statistics.aspx. Access Date: 01.06.2021. google scholar
  • Diebold, F.X. and R.S. Mariano. (1995). Comparing predictive accuracy. Journal of Business and Economic Statistics, 13: 253-63. google scholar
  • Feng, B., Li, Y., & Shen, Z. J. M. (2015). Air cargo operations: Literature review and comparison with practices. Transportation Research Part C: Emerging Technologies, 56, 263-280. google scholar
  • Fernandes, E., & Pacheco, R. R. (2010). The causal relationship between GDP and domestic air passenger traffic in Brazil. Transportation Planning and Technology, 33(7), 569-581. google scholar
  • Fildes, R., Wei, Y., & Ismail, S. (2011). Evaluating the forecasting performance of econometric models of air passenger traffic flows using multiple error measures. International Journal of Forecasting, 27(3), 902-922. google scholar
  • Gillen, D., Hazledine, T., 2015. The economics and geography of regional airline services in six countries. Journal of Transport Geography, 46, 129-136. google scholar
  • Gomez-Herrera, E., 2013. Comparing alternative methods to estimate gravity models of bilateral trade. Empirical economics, 44(3), pp. 1087-1111. google scholar
  • Gomez-Herrera, E., 2013. Comparing alternative methods to estimate gravity models of bilateral trade. Empirical economics, 44(3), pp. 1087-1111. google scholar
  • Grosche, T., Rothlauf, F., Heinzl, A., 2007. Gravity models for airline passenger volume estimation. Journal of Air Transport Management, 13(4), 175-183. google scholar
  • Grosso, M. G., & Shepherd, B. (2011). Air cargo transport in APEC: Regulation and effects on merchandise trade. Journal of Asian economics, 22(3), 203-212. google scholar
  • Gül, H., Tatoğlu, F.Y., 2019. Turizm Talebinin Panel Çekim Modeli Çerçevesinde Analizi. Turizm Akademik Dergisi, 6 (1), pp. 49-60. google scholar
  • Hakim, M. M., & Merkert, R. (2016). The causal relationship between air transport and economic growth: Empirical evidence from South Asia. Journal of Transport geography, 56, 120-127. google scholar
  • Hazledine, T. (2017). An augmented gravity model for forecasting passenger air traffic on city-pair routes. Journal of Transport Economics and Policy (JTEP), 51(3), 208-224.7 google scholar
  • Hazledine, T., 2009. Border effects for domestic and international Canadian passenger air travel. Journal of Air Transport Management, 15 (1), 7-13. google scholar
  • Helpman, E., Melitz, M., & Rubinstein, Y. (2008). Estimating trade flows: Trading partners and trading volumes. The quarterly journal of economics, 123(2), 441-487. google scholar
  • Hwang, C. C., Shiao, G. C., 2011. Analyzing air cargo flows of international routes: an empirical study of Taiwan Taoyuan International Airport. Journal of Transport Geography, 19(4), pp. 738-744. google scholar
  • IGA, 2021. Kargo ve Lojistik Merkezi. Retrieved from: https://www.igairport.com/tr/istanbul-havalimani/kargo-ve-lojistik-merkezi. Access Date: 21.06.2021. google scholar
  • Isard, W., Peck, M. J., 1954. Location theory and international and interregional trade theory. The Quarterly Journal of Economics, pp. 97-114. google scholar
  • Kanafani, A., 1983. Transportation demand analysis, New York. google scholar
  • Law, R., Au, N., 1999. A neural network model to forecast Japanese demand for travel to Hong Kong. Tourism Management, 20(1), pp. 89-97. google scholar
  • Maddala, G. S. (1983). Methods of estimation for models of markets with bounded price variation. International Economic Review, 361-378. google scholar
  • Matsumoto, H. (2004). International urban systems and air passenger and cargo flows: some calculations. Journal of Air Transport Management, 10(4), 239-247. google scholar
  • Matsumoto, H. (2007). International air network structures and air traffic density of world cities. Transportation Research Part E: Logistics and Transportation Review, 43(3), 269-282. google scholar
  • Matsumoto, H., & Domae, K. (2018). The effects of new international airports and air-freight integrator’s hubs on the mobility of cities in urban hierarchies: A case study in East and Southeast Asia. Journal of Air Transport Management, 71, 160-166. google scholar
  • Matsumoto, H., & Domae, K. (2019). Assessment of competitive hub status of cities in Europe and Asia from an international air traffic perspective. Journal of Air Transport Management, 78, 88- google scholar
  • Matsumoto, H., Domae, K., & O’Connor, K. (2016). Business connectivity, air transport and the urban hierarchy: A case study in East Asia. Journal of Transport Geography, 54, 132-139. google scholar
  • Nam, K., Schaefer, T., 1995. Forecasting international airline passenger traffic using neural networks. The Logistics and Transportation Review, 31(3), pp. 239-252. google scholar
  • Santos, S., Tenreyro, S., 2006. The log of gravity. Review of Economics and Statistics, 88, pp. 641-658. google scholar
  • Schneider, H. (1986). Truncated and censored samples from normal populations. Marcel Dekker, Inc.. google scholar
  • Schultz, R. L. (1972). Studies of Airline Passenger Demand: A Review. Transportation Journal, 48-62. google scholar
  • Sun, S., Lu, H., Tsui, K. L., & Wang, S. (2019). Nonlinear vector auto-regression neural network for forecasting air passenger flow. Journal of Air Transport Management, 78, 54-62. google scholar
  • Suryani, E., Chou, S. Y., & Chen, C. H. (2010). Air passenger demand forecasting and passenger terminal capacity expansion: A system dynamics framework. Expert Systems with Applications, 37(3), 2324-2339. google scholar
  • Tatoğlu, F.Y., 2018. İleri panel veri analizi. Basım. İstanbul: Beta Yayıncılık. google scholar
  • Tratar, L. F., & Strmcnik, E. (2016). The comparison of Holt-Winters method and Multiple regression method: A case study. Energy, 109, 266-276. google scholar
  • Van Bergeijk, P. A., & Brakman, S. (Eds.). (2010). The gravity model in international trade: Advances and applications. Cambridge University Press. google scholar
  • Westerlund, J., Wilhelmsson, F., 2011. Estima,ting the gravity model without gravity using panel data. Applied Economics, 43(6), pp. 641-649. google scholar
  • Wickham, R. R., 1995. Evaluation of forecasting techniques for short-term demand of air transportation. Cambridge, Mass.: Massachusetts Institute of Technology, Dept. of Aeronautics & Astronautics. Flight Transportation Laboratory, Massachusetts Institute of Technology, Massachusetts, USA. google scholar
  • World Bank, 2023. Air transport, freight. Retrieved from: https://data.worldbank.org/indicator/IS.AIR.GOOD.MT.K1?locations=TR (accessed 10 February 2023) google scholar
  • Yamaguchi, K., 2008. International trade and air cargo: Analysis of US export and air transport policy. Transportation Research Part E: Logistics and Transportation Review, 44(4), pp. 653-663. google scholar
  • Zhang, X., Zheng, Y., & Wang, S. (2019). A demand forecasting method based on stochastic frontier analysis and model average: An application in air travel demand forecasting. Journal of Systems Science and Complexity, 32(2), 615-633. google scholar
  • Zhang, Y., Findlay, C., 2014. Air transport policy and its impacts on passenger traffic and tourist flows. Journal of Air Transport Management, 34, 42-48. google scholar
  • Zhang, Y., Zhang, A., 2016. Determinants of air passenger flows in China and gravity model: Deregulation, LCC and high-speed rail. Jspeed rail. Journal of Transport Economics and ournal of Transport Economics and Policy, 50 (3), 287(3), 287-303.303. google scholar
There are 60 citations in total.

Details

Primary Language English
Subjects Econometrics (Other)
Journal Section RESEARCH ARTICLE
Authors

Gizem Kaya 0000-0002-6870-7219

Umut Aydın 0000-0003-4802-8793

Burç Ülengin 0000-0001-5276-8861

Publication Date December 27, 2023
Submission Date June 7, 2023
Published in Issue Year 2023 Issue: 39

Cite

APA Kaya, G., Aydın, U., & Ülengin, B. (2023). A Comparison of Forecasting Performance of PPML and OLS estimators: The Gravity Model in the Air Cargo Market. EKOIST Journal of Econometrics and Statistics(39), 112-128. https://doi.org/10.26650/ekoist.2023.39.1310639