Impact of tourism on economic growth, moderating role of political stability; evidence from south Asian economies

Abstract

One of the major industries that have played part in economical development as well as stabilizing the financial conditions worldwide is identified as Tourism Industry. The purpose of this study was to determine the impact of tourism sector on economic growth of Pakistan, India, and Bangladesh. The precise goal of this research was to determine the relationships between tourism and economic growth, political stability on economic growth as well as the effect of tourism on economic growth in the presence of political stable environment in these countries. The study uses econometric models on the data obtained for the time period spanning from 2000 to 2017.The study used growth of real gross domestic product, income from international tourists, political stability index and real effective exchange rate to investigate relationship. Fixed effect and common effect tests are used in this research to explore the connection amid tourism and economic development in these countries. This study confirms the significant relationship between tourism and economic growth of these nations as well political stability has also positive impact on the economic growth, however, in the presence of political stability tourism sector doesn’t significantly boost the economical growth. The outcome of this research in particular, confirms the tourism-led economic growth hypothesis that is tourism has a positive impact of economic growth in the developing countries. Furthermore, descriptive stats and residual cross section dependence test has also been used in this research to analyze the data. The results confirm the need of policy makers and local bodies to focus on promoting, investing as well as enhancing intercontinental travelling demand to achieve sustainable growth along with development in the sector