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Economic Dynamics of Tourism in Nepal: A VECM Approach

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  • GAUTAM, BISHNU PRASAD

Abstract

Tourism has been growing in Nepal. Tourism creates various direct, indirect and induced effects in the economy. This paper is designed to examine the role of tourism development on economic growth in Nepal. The study is based on annual data of gross domestic product, foreign exchange earnings from tourism and real effective exchange rate for the period spanning from 1975 to 2013. It examines the causality and long-run relationships between economic growth and Tourism development in Nepal using co-integration techniques and a Vector Error Correction Model (VECM). The evidence confirms that tourism development causes economic growth in short run in Nepal. The result also indicates the causality runs from both sides i.e. tourism development to economic growth and economic expansion to tourism growth implying for the greater efforts to encourage both the activities in the economy.

Suggested Citation

  • Gautam, Bishnu Prasad, 2014. "Economic Dynamics of Tourism in Nepal: A VECM Approach," MPRA Paper 58102, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:58102
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    References listed on IDEAS

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    1. Shoorabeer Paudyal Ph.D., 2012. "Does Tourism Really Matter for Economic Growth? Evidence from Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 24(1), pages 48-66, April.
    2. Isabel Cortés-Jiménez & Manuel Artís, 2005. "The role of the tourism sector in economic development - Lessons from the Spanish experience," ERSA conference papers ersa05p488, European Regional Science Association.
    3. Jacint Balaguer & Manuel Cantavella-Jorda, 2002. "Tourism as a long-run economic growth factor: the Spanish case," Applied Economics, Taylor & Francis Journals, vol. 34(7), pages 877-884.
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    7. Shoorabeer Paudyal, Ph.D., 2012. "Does Tourism Really Matter for Economic Growth? Evidence from Nepal," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 24(1), pages 48-66, April.
    8. Ageli, Mohammed Moosa, 2013. "Tourism Economics in Saudi Arabia: PP-VAR Approach," MPRA Paper 46602, University Library of Munich, Germany.
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    12. Bishnu Prasad Gautam Ph.D., 2011. "Tourism and Economic Growth in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 23(2), pages 18-30, October.
    13. Bishnu Prasad Gautam Ph. D., 2008. "Economic Impact of Tourism Finance in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 20, pages 62-73, April.
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    Cited by:

    1. H. M. Ertugrul & S. Yildirim & F. Ayhan, 2017. "An Investigation of Stationarity Properties of the Turkish Tourism Income Variable," International Econometric Review (IER), Econometric Research Association, vol. 9(2), pages 37-49, September.

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    More about this item

    Keywords

    Contribution of tourism; Economic dynamics; Foreign exchange earnings; tourism development; Tourism-led-growth hypothesis; Nepal;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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