International air passenger traffic, trade openness and exchange rate in Brazil: A Granger causality test

- Passenger movement, trade openness and currency purchasing power are co-integrated.
- Innovation in trade openness has 38% impact on passenger movement.
- Currency purchasing power has up to 53% impact on passenger movement.
- The model of causality applied here explains 93% of passenger movement.

Brazil has invested substantially in encouraging international air passenger traffic. The results, however, have fallen far short of expectations, raising the question of what factors should be considered in policy-making to encourage the development of international passenger air traffic in Brazil. Based on indications in the literature, this study explores relations between international trade-related factors and international air passenger movement in Brazil, using the Granger causality methodology. The study results show evidence that changes in international trade indicators hold a long-term relationship with, and precede, variations in international air passenger movement. These indicators also show significant impact on the evolution of international air passenger movement in Brazil. The study indicates a need to rethink policy and may serve as a point of reference for other developing countries.