Forecasting Automobile Demand for Economies in Transition: A Dynamic Simultaneous-Equation System Approach

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Forecasting Automobile Demand for Economies in Transition: A Dynamic Simultaneous-Equation System Approach

Abu-Eisheh, Sameer A. / Mannering, Fred L.

The dynamic characteristics of automobile demand are critical for national economic and revenue predictions. Automobile demand and ownership level forecasts are also the basis for travel demand models, land-use-transport interaction models, and transport policies and regulations. In this article, a dynamic automobile demand simulation model is developed utilizing a simultaneous-equation system. The system considers the interaction between supply and demand and the resulting equilibrium. Although forecasting automobile demand has been previously investigated, it has not been within such a dynamic simulation framework. Our model includes the current and lagged automobile quantity and price variables; economic, financial and operating cost variables; and income and government policy variables. The capabilities of the model are then demonstrated through performing a number of simulation experiments considering various growth-development scenarios, changes in operating costs, government policies towards automobile imports, and demographic/employment shifts. Relevant tests are applied to examine the econometric specifications and to evaluate the simulation model performance.