Nexus between Tourism Demand and Output Per Capita with Relative Importance of Trade Openness and Financial Development: A Study of Malaysia

Tourism Economics, December 2016 Forthcoming

43 Pages Posted: 25 Aug 2015

See all articles by Muhammad Qaiser Shahbaz

Muhammad Qaiser Shahbaz

COMSATS Institute of Information Technology (CIIT)

Ronald R. Kumar

University of the South Pacific

Stanislav Hristov Ivanov

Varna University of Management (VUM); Zangador

Nanthakumar Loganathan

University Sultan Zainal Abidin

Date Written: 2016

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 of trade openness is 0.19, of financial development is 0.09, and of 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.

Keywords: tourism and output per capita, Malaysia, trade openness, financial development, tourism-led growth hypothesis

Suggested Citation

Shahbaz, Muhammad Qaiser and Kumar, Ronald Ravinesh and Ivanov, Stanislav Hristov and Loganathan, Nanthakumar, Nexus between Tourism Demand and Output Per Capita with Relative Importance of Trade Openness and Financial Development: A Study of Malaysia (2016). Tourism Economics, December 2016 Forthcoming. Available at SSRN: https://ssrn.com/abstract=2649861

Muhammad Qaiser Shahbaz

COMSATS Institute of Information Technology (CIIT) ( email )

Park Road
Chak Shahzad
Islamabad, North-West Frontier Province 44000
Pakistan

Ronald Ravinesh Kumar

University of the South Pacific ( email )

Laucala Campus
Suva
Fiji

HOME PAGE: http://www.entrepreneursworld.ning.com

Stanislav Hristov Ivanov (Contact Author)

Varna University of Management (VUM) ( email )

13 Oborishte Street
Varna, 9000
Bulgaria
+359 898 680713 (Phone)

HOME PAGE: http://www.vumk.eu

Zangador ( email )

Varna, 9010
Bulgaria

HOME PAGE: http://www.zangador.eu

Nanthakumar Loganathan

University Sultan Zainal Abidin ( email )

Kampus Gong Badak
Kuala Terengganu, 20400
Malaysia

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