Abstract:
The general objective of this study is to identify the long run and short run causal relationships
between air transport demand (passenger and freight) and Ethiopian economy. This paper also
aimed to establish the empirical evidence on short-run dynamics and long-run relationships that
have been experienced and expected to exist between Ethiopian economy and air transport
demands. The empirical evidence obtained from the causality tests (long run, short run, and
Granger Causality) showed that there is unidirectional causality going in a positive direction from
air transport development (passenger and freight) to local economic growth. The study also shows
impacts of positive changes like bilateral agreements and implementations of open sky policy on
air transport demand which have significant implications in economic activities. The empirical
findings of the paper have some policy and management implications.
