Long-Run Relationship Between Economic Development and International Tourism in Pakistan
Keywords:Economic Development, Financial Development, Stock Market Development, Tourism, Cointegration
This article examines the link between economic development and international tourism in the context of Pakistan. The study uses Autoregressive Distributed Lag tests (ARDL) for the long-term relationship; the short-term relationship is examined with Error Correction model, and the VECM-Granger causality to determine the direction of the causal flow. The study uses annual data from the CEIC and World Bank databases for the period 1990-2017. The novelty stems from the perspective that there is no formal evidence on long-run dynamics between economic development indicators and international tourism from Pakistan. It contributes to the existing literature on this vital phenomenon. The empirical results document the long-term and short-term association between the variables. We also find a two-way causal flow between economic development and tourism. In addition, it offers policy implications for focusing on three economic dimensions, e.g. economic development, financial development, and stock market development, which subsequently attracts international tourism. Intuitively, promulgates National culture and image across borders and strengthens the National Treasury as well.
Akama, J. S., & Kieti, D. (2007). Tourism and socio-economic development in developing countries: A case study of Mombasa Resort in Kenya. Journal of sustainable tourism, 15(6), 735-748.
Antonakakis, N., Dragouni, M., Eeckels, B., & Filis, G. (2016). Tourism and economic growth: Does democracy matter? Annals of Tourism Research, 61(C), 258-264.
Azeem, A., Aziz, B., & Jadoon, A. K. (2015). Financial Development: A Contributing Agent of Economic Growth-Study of Selected Asian Countries. Pakistan Business Review, 17(2), 397-415.
Balaguer, J., & Cantavella-Jorda, M. (2002). Tourism as a long-run economic growth factor: the Spanish case. Applied economics, 34(7), 877-884.
Breitung, J. (2001). The local power of some unit root tests for panel data Nonstationary panels, panel cointegration, and dynamic panels (pp. 161-177): Emerald Group Publishing Limited.
Culiuc, M. A. (2014). Determinants of international tourism: International Monetary Fund.
Dickey, D. A., & Fuller, W. A. (1979). Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Journal of the American Statistical Association, 74(366a), 427-431. doi: 10.1080/01621459.1979.10482531
Dickey, D. A., & Fuller, W. A. (1981). Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometrica, 49(4), 1057-1072. doi: 10.2307/1912517
Dritsakis, N. (2004). Cointegration analysis of German and British tourism demand for Greece. Tourism Management, 25(1), 111-119.
Du, D., Lew, A. A., & Ng, P. T. (2016). Tourism and economic growth. Journal of Travel Research, 55(4), 454-464.
Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: journal of the Econometric Society, 251-276.
Faber, B., & Gaubert, C. (2016). Tourism and Economic Development: Evidence from Mexico's
Review of Economics and Development Studies, Vol. 6 (2) 2020, 329-344
Coastline: National Bureau of Economic Research.
Haug, A. A. (2002). Temporal aggregation and the power of cointegration tests: a Monte Carlo study. Oxford Bulletin of Economics and Statistics, 64(4), 399-412.
Hrubcova, G., Loster, T., & Obergruber, P. (2016). The Economic Effects of Tourism in the Group of the Least Developed Countries. Procedia Economics and Finance, 39, 476-481. doi: http://dx.doi.org/10.1016/S2212-5671(16)30351-3
Hye, A. Q. M., & Khan, A. R. E. (2013). Tourism-led growth hypothesis: a case study of Pakistan. Asia Pacific Journal of Tourism Research, 18(4), 303-313.
Jebran, K., Abdullah, A., Iqbal, A., & Ullah, I. (2016). Effects of remittances on per capita economic growth of Pakistan. Pakistan Business Review, 18(1), 1-18.
Johansen, S. (1991). Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica: Journal of the Econometric Society, 1551-1580.
Kennell, J. (2016). Tourism and economic development in Suffolk.
Khalil, S., Kakar, M. K., & Malik, A. (2007). Role of Tourism in Economic Growth: Empirical Evidence from Pakistan Economy [with Comments]. The Pakistan Development Review, 985-995.
Liu, Z. (2003). Sustainable tourism development: A critique. Journal of sustainable tourism, 11(6), 459-475.
MacKinnon, J. G., Haug, A. A., & Michelis, L. (1999). Numerical distribution functions of likelihood ratio tests for cointegration. Journal of applied econometrics, 563-577.
Malik, S., Chaudhry, I. S., Sheikh, M. R., & Farooqi, F. S. (2010). Tourism, economic growth and current account deficit in Pakistan: Evidence from co-integration and causal analysis. European Journal of Economics, Finance and Administrative Sciences, 22, 21-31.
Milne, S., & Ateljevic, I. (2001). Tourism, economic development and the global-local nexus: theory embracing complexity. Tourism geographies, 3(4), 369-393.
Pesaran, M. H., & Shin, Y. (1998). An autoregressive distributed-lag modelling approach to cointegration analysis. Econometric Society Monographs, 31, 371-413.
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.
Qian, C., Sasaki, N., Shivakoti, G., & Zhang, Y. (2016). Effective governance in tourism development – An analysis of local perception in the Huangshan mountain area. Tourism Management Perspectives, 20, 112-123. doi: http://dx.doi.org/10.1016/j.tmp.2016.08.003
Sequeira, T. N., & Macas Nunes, P. (2008). Does tourism influence economic growth? A dynamic panel data approach. Applied economics, 40(18), 2431-2441.
Sharif, A., & Raza, S. A. (2016). Dynamic relationship between urbanization, energy consumption and environmental degradation in Pakistan: Evidence from structure break testing. Journal of Management Sciences, 3(1), 01-21.
Sinclair, M. T. (1998). Tourism and economic development: A survey. The journal of development studies, 34(5), 1-51.
Srinivasan, P., & Kalaivani, M. (2016). Tourism Expansion and Economic Growth in Asia-Pacific Nations: A Panel Causality Approach.
Ullah, Z., & Wizarat, S. (2016). Long term relationship between stock market development and
Review of Economics and Development Studies, Vol. 6 (2) 2020, 329-344
economic growth in south asia: Panel data & ardl model estimations. Pakistan Business Review, 18(3), 541-557.
WEF. (2017). Global Competitiveness Report World Economic Forum, New York: USA Inc.
Zhang, L., & Gao, J. (2016). Exploring the effects of international tourism on China's economic growth, energy consumption and environmental pollution: Evidence from a regional panel analysis.