Does Tourism-led Growth Hypothesis Exist in Pakistan? A Fresh look from Combine Cointegration and Causality Approach with Structural Breaks (original) (raw)
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Review of Education, Administration & Law
The tourism sector has achieved considerable importance over time in Pakistan as it makes indirect profits that increase foreign trade, public infrastructure, and foreign direct investment. Pakistan has massive potentials in the tourism sector. The present study analyzes the nexus between tourism and economic growth in Pakistan by using the Gregory Hansen co-integration and ARDL structural break econometrics approach on annual data from 1985 to 2020. The findings obtained through Gregory-Hansen's approach showed that structural break had appeared in the year 2009. For estimating the long-run coefficients structural break ARDL approach has been used. The study shows that tourism receipts significantly escalate economic growth. Furthermore, labor force participation and gross capital formation significantly and positively impacts the economic growth. The study recommends that Pakistan should pay proper attention to the tourism industry to promote allied sectors for achieving highe...
Tourism has become the world’s most vital industry and dynamic sector with its direct and indirect effects on economy. Pakistan has a great potential for the tourism due to its diverse topography culture and traditions. In this study, we examine the cointegration and causal relations among the tourism, economic growth and current account deficit in Pakistan for the period of 1972 to 2007. Using Johansen cointegration technique and ECM, this paper finds that there is a long run relationship between number of tourists and GDP growth through the channel of reduction in current account deficit. The causal relationship between number of tourists, CAD and GDP growth is determined separately using Granger Causality test. This also confirms the hypothesis that there is a unidirectional causal relationship from CAD to GDP, Tourists to GDP and Tourists to CAD. In the end, the study incorporates some suggestions for improving the tourism industry in Pakistan focusing on tourism led growth.
Tourism-Led Growth Hypothesis: A Case Study of Pakistan
Asia Pacific Journal of Tourism Research, 2012
Economists are of the view that tourism leads to economic development just like human and physical capital and exports. A few studies have discussed this issue empirically. The current study aims to estimate the long-run relationship between income from tourism and the economic growth of Pakistan by using the annual time series data of 1971–2008, and by employing the Johansen Juselius cointegration, autoregressive distributed lag model and rolling windows bounds testing approach to check the stability of the model. The results confirm the long-run relationship between income from tourism and economic growth and explain that income from tourism has led economic growth in Pakistan except in the years 2006, 2007, and 2008.
STRUCTURAL BREAKS, TOURISM DEVELOPMENT AND ECONOMIC GROWTH: EVIDENCE FROM THAILAND
Our paper differs from previous studies by examining the issue of whether regime changes have broken down the stability of the long-run relationships between tourism development and real GDP in Taiwan for the 1959-2003 period. We empirically investigate the co-movements and the causal relationships among real GDP, tourism development, and the real exchange rate in a multivariate model. We use two different tourism variables-international tourism receipts and number of international tourist arrivals. To employ the unit root tests and the cointegration tests allowing for a structural break, the empirical evidence clearly shows that the causality between tourism and economic growth is bi-directional. Lastly, the international and cross-strait political change, economic shocks, and the relaxing of some tourism control and policies would break down the stability of the relationships between tourism development and economic growth. Overall, we do find the structural breakpoints, and they look to match clearly with the corresponding critical economic, political, or tourist incidents.
Asia Pacific Journal of Tourism Research, 2019
Do shocks affect tourist inflows permanently or temporarily? To examine this question, we consider a region in Northern Pakistan, Gilgit-Baltistan, known for its natural and scenic beauty and with a history of huge tourist inflows, both domestic and international. The tourist arrivals from significant source markets are investigated using univariate and Lagrange Multiplier (LM) unit root tests with two structural breaks to examine if shocks to the time path of visitors' inflow are permanent or transitory. According to the results, the univariate and LM unit root test with two breaks reject the unit root null for all major source markets. The findings suggest transistory effects rather than permanent effects of shocks on the growth path of tourist arrivals to Gilgit-Baltistan. This result further predicts the sustainability of the tourism sector in the region in the long run.
Tourism Management, 2009
This paper empirically revisits and investigates the tourism-led-growth (TLG) hypothesis in the case of Turkey by employing the bounds test and Johansen approach for cointegration using annual data from 1960. Although Gunduz and Hatemi-J (2005 Is the tourism-led growth hypothesis valid for Turkey? Applied Economics Letters. 12, 499-504) support the TLG hypothesis for Turkey (suggesting unidirectional causation from tourism to economic growth) by making use of the leveraged bootstrap causality tests, and Ongan and Demiroz (2005; The contribution of tourism to the long-run Turkish economic growth. Ekonomický časopis [Journal of Economics]. 53(9), 880-894.) suggest bidirectional causality between international tourism and economic growth in Turkey, this study does not find any cointegration between international tourism and economic growth in Turkey. Therefore, unlike the findings of and , this study rejects the TLG hypothesis for the Turkish economy since no cointegration was found and error correction mechanisms plus causality tests cannot be run for further steps in the long term.
Investigating the Role of Tourism in Economic Growth: Empirical Evidence from Pakistan
Polish Journal of Sport and Tourism, 2022
Introduction. This study aims to explore the impact of tourism along with some other regressors, namely labor force, official development assistance, local investment, and inflation rate on the economic growth rate of the developing country of Pakistan. Material and Methods. We used annual time series data over the period from 1980 to 2018 for empirical analysis. Based on the order of integration of data, we employed an Autoregressive Distributed Lag (ARDL) approach. Results. Empirical results vindicated a positive relationship between tourism and growth. The official development assistance and inflation rate have shown significantly negative impacts on the economic growth of Pakistan, whereas domestic investment has shown an insignificantly positive impact on the economic growth. Conclusions. The empirical findings exhibit that tourism plays a key role in the process of economic growth and development of Pakistan. The study recommends that the management authorities should implemen...
SAGE Open
Tourism is a key source of income and employment today, and different parts of the world are heavily dependent on it. The main purpose of this article was to demonstrate the consequences of long-run and short-run relationship on international tourism in Pakistan and its impact on economic growth by applying an autoregressive distributed lag (ARDL) bounds testing approach. Augmented Dickey–Fuller unit root test was employed to check the stationarity of the variables, while an ARDL bounds testing approach was used to measure the long-run and short-run dynamics linkage among the study variables. The results show that international tourism and expenditures for passenger transport items have a positive impact on economic growth. Similarly, long-run dynamics also revealed that international tourism expenditures for travel items and international tourism expenditures, international tourism receipts for passenger transport items and international tourism receipts for travel items also had a...
The Cointegration and Causality Tests for Tourism and Trade in Malaysia
International Journal of Economics and Finance, 2010
This paper examines the relationship between tourism and trade that might have evolved in the development of Malaysian economy by using cointegration and causality tests. All analyses have been conducted with quarterly data of international tourism receipts, exports, imports and total trade of Malaysia, over the period of 1995:1 through 2006:4. The results of the unit root tests indicate that the data are stationary in first-difference and not in level. The results of the JJ co integration test however, show that all the series are not cointegrated in the long run, hence, long-run equilibrium did not exist between all the series. Using Granger-causality tests the study found that there is one-way causal effect (unidirectional causality) running from exports to international tourism receipts at 5% significance level. The causality test also shows a one-way causal effect running from imports to international tourist receipts at 5% significance level and total trade to international tourism receipts at 10% significance level. This leads to a conclusion that increase in total trade, exports and imports will cause growth in the tourism sector, which means that most of tourist arrivals are related to business tourism. Therefore, to increase and sustain in the growth of tourism sector, future economic policy should focus more on tourism and trade related, in order to generate more foreign exchange earning to Malaysia.