INVESTIGATION OF FOREIGN TOURISM DEMAND IN CROATIA USING PANEL DATA ANALYSIS

Tourism plays an important role in Croatia due to its positive effects on the economy. In this paper, foreign tourism demand is estimated through the use of the dynamic model and the GMM method on a dataset of 19 countries in the period from 1994 to 2009. The results indicate that tourism demand is inelastic with respect to income, but close to unit elasticity with respect to substitute prices. Also, it responds more intensely to changes in relative prices. Capital investments have positive effects on the model, but one of the most important factors is the contentment of tourists. It is reflected in the coefficient of adjustment which is close to the unit value. This way of modelling has many advantages and can be considered as an initial attempt of modelling tourism demand in Croatia using panel data.