Autoregressive Distributed Lag
An autoregressive distributed lag (ARDL) model was developed and used with OLS regression analysis. Traffic was regressed onto similar explanatory variables as in prior models, but also onto lagged values of traffic. The inclusion of lagged values of the dependent variable (traffic) is done to account for the slow adjustment of supply (in the form of capacity) to changes in the explanatory variables. The applicability of this assumption is less reasonable for the U.S. domestic market as the barriers to expanding capacity are fewer than on international routes; the U.S. domestic market was therefore excluded from ARDL estimation16.
InterVISTAS experimented with the use of ‘prior period’ and ‘year over year’ lags. Although both showed some degree of success in controlling for these factors, ‘year over year’ lags had higher correlations with current traffic levels than ‘prior period’ lags, and were determined to be the preferred form of lagged variable.
The ARDL models used a formulation as follows: