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Nexus between Tourism demand and output per capita with relative importance of trade and financial development: A study of Malaysia

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  • Shahbaz, Muhammad
  • Kumar, Ronald Ravinesh
  • Ivanov, Stanislav
  • Loganathan, Nanthakumar

Abstract

This paper revisits the tourism-growth nexus in Malaysia using time series quarter frequency data over the period of 1975-2013. We examine the impact of tourism using two separate indicators – tourism receipts per capita and visitor arrival per capita. Using the augmented Solow (1956) production function and the ARDL bounds procedure, we also incorporate trade openness and financial development, and account for structural break in series. Our results show the evidence of cointegration between the variables. Assessing the long-run results using both indicators of tourism demand, it is noted that the elasticity coefficient of tourism is 0.13 and 0.10 when considering visitor arrival and tourism receipts (in per capita terms) respectively. Notably, the impact of tourism demand is marginally higher with visitor arrival. The elasticity for trade openness is 0.19, financial development is 0.09, and capital share is 0.15. In the short-run, the coefficient of tourism is marginally negative, and for financial development and trade openness, it is 0.01 and 0.18, respectively. The Granger causality tests show bi-directional causation between tourism and output per capita; financial development and tourism; and trade openness and tourism demand, duly indicating the feedback or mutually reinforcing impact between the variables, and the evidence that tourism is central to enhancing the key sectors and the overall income level.

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  • Shahbaz, Muhammad & Kumar, Ronald Ravinesh & Ivanov, Stanislav & Loganathan, Nanthakumar, 2015. "Nexus between Tourism demand and output per capita with relative importance of trade and financial development: A study of Malaysia," MPRA Paper 67226, University Library of Munich, Germany, revised 11 Oct 2015.
    • Handle: RePEc:pra:mprapa:67226
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    Cited by:

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    2. Muhammad Shahbaz & Ramzi Benkraiem & Anthony Miloudi & Aviral Kumar Tiwari, 2019. "Tourism-induced financial development in Malaysia: New evidence from the tourism development index," Tourism Economics, , vol. 25(5), pages 757-778, August.
    3. Abdul Rehman & Hengyun Ma & Muhammad Irfan & Munir Ahmad & Ousmane Traore, 2020. "Investigating the Influence of International Tourism in Pakistan and Its Linkage to Economic Growth: Evidence From ARDL Approach," SAGE Open, , vol. 10(2), pages 21582440209, June.
    4. Xu Huang & Emmanuel Silva & Hossein Hassani, 2018. "Causality between Oil Prices and Tourist Arrivals," Stats, MDPI, vol. 1(1), pages 1-21, October.
    5. Muntasir Murshed & Haider Mahmood & Tarek Tawfik Yousef Alkhateeb & Suvajit Banerjee, 2020. "Calibrating the Impacts of Regional Trade Integration and Renewable Energy Transition on the Sustainability of International Inbound Tourism Demand in South Asia," Sustainability, MDPI, vol. 12(20), pages 1-17, October.
    6. Isabel Carrillo-Hidalgo & Juan Ignacio Pulido-Fernández, 2019. "The Role of the World Bank in the Inclusive Financing of Tourism as an Instrument of Sustainable Development," Sustainability, MDPI, vol. 12(1), pages 1-21, December.
    7. Muhammad Ahad, 2016. "Does Tourism-led Growth Hypothesis exist in Pakistan? A Freshlook from Combine Cointegration and Causality Approach with Structural Breaks," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 4(2), pages 94-111, February.
    8. Arash Ketabforoush Badri & Karim Panahi, 2018. "The Study of Factors Influencing Tourism Demand with Emphasis on the Degree of Openness of the Economy," Noble International Journal of Social Sciences Research, Noble Academic Publsiher, vol. 3(10), pages 78-89, October.
    9. Hanafi Hussin, 2018. "Gastronomy, Tourism, and the Soft Power of Malaysia," SAGE Open, , vol. 8(4), pages 21582440188, October.
    10. Umit Bulut & Emrah Kocak & Courtney Suess, 2020. "The effect of freedom on international tourism demand: Empirical evidence from the top eight most visited countries," Tourism Economics, , vol. 26(8), pages 1358-1373, December.
    11. Stauvermann, Peter Josef & Kumar, Ronald Ravinesh, 2017. "Productivity growth and income in the tourism sector: Role of tourism demand and human capital investment," Tourism Management, Elsevier, vol. 61(C), pages 426-433.
    12. Peter Josef Stauvermann & Ronald Ravinesh Kumar & Syed Jawad Hussain Shahzad & Nikeel N. Kumar, 2018. "Effect of tourism on economic growth of Sri Lanka: accounting for capital per worker, exchange rate and structural breaks," Economic Change and Restructuring, Springer, vol. 51(1), pages 49-68, February.
    13. Shahzad, Syed Jawad Hussain & Shahbaz, Muhammad & Ferrer, Román & Kumar, Ronald Ravinesh, 2017. "Tourism-led growth hypothesis in the top ten tourist destinations: New evidence using the quantile-on-quantile approach," Tourism Management, Elsevier, vol. 60(C), pages 223-232.
    14. David Alaminos & Ana León-Gómez & José Ramón Sánchez-Serrano, 2020. "A DSGE-VAR Analysis for Tourism Development and Sustainable Economic Growth," Sustainability, MDPI, vol. 12(9), pages 1-22, May.
    15. Jong, Meng-Chang, 2020. "Empirical Review on Tourism Demand and COVID-19," MPRA Paper 103919, University Library of Munich, Germany.
    16. Siamand Hesami & Bezhan Rustamov & Husam Rjoub & Wing-Keung Wong, 2020. "Implications of Oil Price Fluctuations for Tourism Receipts: The Case of Oil Exporting Countries," Energies, MDPI, vol. 13(17), pages 1-17, August.

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    More about this item

    Keywords

    tourism and output per capita; Malaysia; trade openness; financial development; tourism-led growth hypothesis;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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