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Economic Growth, Tourism and Selected Macroeconomic Variables: A Triangular Causal Relationship in Malaysia

Author

Listed:
  • Cheam Chai Li

    (Cheam Chai Li is at the College of Business Management, UiTM Kelantan, Bukit Ilmu, 18500 Machang, Kelantan, Malaysia, email: clcheamnet@yahoo.com)

  • Rosli Mahmood

    (Rosli Mahmood is at the College of Business, Universiti Utara Malaysia, 06010 Sintok, Kedah, email: rosli@uum.edu.my)

  • Hussin Abdullah

    (Hussin Abdallah is at the College of Arts and Sciences, Universiti Utara Malaysia, 06010, Sintok, Kedah, email: hussin2141@uum.edu.my)

  • Ong Soon Chuan

    (Ong Soon Chuan is at the College of Business and Entrepreneurship, Universiti Malaysia Kelantan, 16010 Pengkalan Chapter, Kelantan, Malaysia, email: chuan@umk.edu.my)

Abstract

Tourism is one of the largest and fastest growing industries in the world, which makes it a potential strategic factor for economic growth. This adds to the strong interest in the role of tourism in Malaysia’s economic growth as it is the second-largest contributor to foreign exchange earnings after manufacturing. In addition, empirical results associated with Granger causality among economic growth, tourism and exports within the neoclassical framework are inconsistent. The objectives of this study, thus, are to determine: the long-run relationship; the long-run and short-run Granger causality; and the long-run triangular Granger causality between economic growth and tourism receipts corresponding to selected macroeconomic variables such as government tourism expenditure, physical capital, education, health and exports as control variables. The long-run Granger causality in vector error correction model (VECM) shows economic growth, tourism receipts and health complement each other (bidirectional causality), while unidirectional causalities are found between government tourism expenditure, physical capital, education and exports to economic growth. In addition, enhancing physical capital, education, health, exports and government tourism expenditure precede tourism receipts; all these in turn indirectly lead to economic growth, thus witnessing triangular relationships among them. JEL Classification: C01, C32, L83, 047, O53

Suggested Citation

  • Cheam Chai Li & Rosli Mahmood & Hussin Abdullah & Ong Soon Chuan, 2013. "Economic Growth, Tourism and Selected Macroeconomic Variables: A Triangular Causal Relationship in Malaysia," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 7(2), pages 185-206, May.
    • Handle: RePEc:sae:mareco:v:7:y:2013:i:2:p:185-206
    DOI: 10.1177/0973801013483503
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    3. Ma, Tao & Hong, Tao & Zhang, Haozhe, 2015. "Tourism spatial spillover effects and urban economic growth," Journal of Business Research, Elsevier, vol. 68(1), pages 74-80.

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    More about this item

    Keywords

    Economic Growth; Tourism; Neoclassical Model; Johansen Cointegration; Granger Causality; VECM; Malaysia;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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