TOURISM AND ECONOMIC GROWTH LINKAGES IN MALAYSIA

Abstract

This study attempts to test a hypothesis of the relationship between the tourism sector and economic growth in Malaysia. Although a large number of literatures indicate that there is strong correlation between the tourism industry and economic growth, not much is known on the dynamic inter-relationship between these variables. This study employs recently developed ARDL bounds testing approach to cointegration. The estimated result based on the long run time series behaviour for the number of tourist arrival and economic growth indicator shows that these variables are not cointegrated. In the short run analysis, we found that economic growth has unidirectional Granger caused to the tourism activities. Recognition of the existence of a causal relationship between international tourism and economic growth has important implications for the development of different tourism activities and policy decisions. In order to attract tourism activities, effort must be taken to promote stability as well as sustainability of the economy of this country.