This study, empirically examines the aggregate tourism demand function for Pakistan using time series data for the period 1960-2006. The total tourism receipts in Pakistan are related to the world income, relative prices and transportation cost. This study employs bounds testing cointegration procedure proposed by Pesaran et al. (2001) to compute the short and long-run elasticities of income, prices, and transportation cost variables. Also the CUSUM and CUSUMSQ stability tests are implemented on the aggregate tourism demand function. The empirical results indicate that income is the most significant variable in explaining the aggregate tourism receipts to Pakistan and there exists a stable tourism demand function.
