The Dynamic Relationship between Economic Growth, Tourism Activity, and Real Exchange Rate in Indonesia
Abstract
This study examines the effect of tourism activity on the economic growth in Indonesia for the period of 1984 - 2014. This study applies the vector autoregressive model, along with the Granger causality test and the persistence profile to analyze the dynamic relationship between tourism activity, economic growth, and real exchange rate in Indonesia. To examine the shock response of the variables, this study uses variance decomposition and impulse response function approach. Throughout analysis is performed based on the empirical literature of the tourism-led growth (TLG) hypothesis. The results show that, based on the co-integration test, there is no long-term relationship between tourism activity and economic growth, while the Granger causality test results no evidence of causality between observed variables, except for economic growth and real exchange rate. In addition, by using variance decomposition and impulse response function to analyze the response of each variable. In explaining the shock of tourism activity in Indonesia, economic growth is more important than the real exchange rate. Meanwhile, tourism activity and real exchange rates are equally important in explaining the shock of economic growth. The impulse response function states that the shock of economic growth and real exchange rate has a positive effect on the tourism activity in the short- and long-term. In addition, the shock of tourism activity has a positive effect on economic growth, while the real exchange rate shock has a negative effect on economic growth in Indonesia.
References
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[2] Balaguer, J., and Cantavella-Jordá, M. 2002. Tourism as a long-run economic growth factor: The Spanish case. Applied Economics, 34(7): 877–884. Available at: http://dx.doi.org/10.1080/00036840110058923
[3] Belloumi, M. 2010. The relationship between tourism receipts, real effective exchange rate and economic growth in Tunisia. International Journal of Tourism Research, 12(5): 550–560. DOI: 10.1002/jtr.774
[4] Bento, J.P.C. 2016. Tourism and economic growth in Portugal : An empirical investigation of causal links. Tourism & Management Stuidies, 12(1): 164–171. DOI: 10.18089/tms.2016.12117
[5] Brida, J.G., Lanzilotta, B., and Pizzolon, F. 2016. Dynamic relationship between tourism and economic growth in MERCOSUR countries : a nonlinear approach based on asymmetric time series models. Economics Bulletin, 36(2): 879–894.
[6] Brida, J.G., Risso, W.A., and Bonapace, A. 2008. The contribution of tourism to economic growth: an empirical analysis for the case of Chile. Sustainable Tourism. Available at: http://ssrn.com/abstract=1298404.
[7] Brida, J.G., Risso, W.A., and Carrera, E.J.S. 2008. Tourism’s Impact on Long-Run Mexican Economic Growth. Economics Bulletin, 3(21): 1–8. Available at: http://economicsbulletin.vanderbilt.edu/2008/volume3/EB-07C20155A.pdf.
[8] Chiu, Y., and Yeh, L., 2016. The Threshold Effects of the Tourism-Led Growth Hypothesis : Evidence from a Cross-sectional Model. Journal of Travel Research, (51). DOI: 10.1177/0047287516650938
[9] Clancy, M.J. 1999. Tourism and development evidence from Mexico. Annals of Tourism Research, 26(1): 1–20.
[10] Croes, R., and Vanegas, M. 2008. Cointegration and Causality between Tourism and Poverty Reduction. Journal of Travel Research, 47(1): 94–103. DOI: 10.1177/0047287507312429
[11] De Vita, G., and Kyaw, K.S. 2016. Tourism Specialization, Absorptive Capacity, and Economic Growth. Journal of Travel Research. DOI: 10.1177/0047287516650042
[12] Dritsakis, N. 2004. Tourism as a long-run economic growth factor: an empirical investigation for Greece using causality analysis. Tourism Economics, 10(3): 305–316. DOI: 10.5367/0000000041895094
[13] Durbarry, R. 2004. Tourism and economic growth: the case of Mauritius. Tourism Economics, 10(4): 389–401. DOI: 10.5367/0000000042430962
[14] Elkan, W. 1975. The relation between tourism and employment in Kenya and Tanzania. Journal of Development Studies, 11(2): 123–130. DOI: 10.1080/00220387508421529
[15] Fayissa, B., Nsiah, C., and Tadesse, B. 2011. Research note: Tourism and economic growth in Latin American countries - Further empirical evidence. Tourism Economics, 17(6): 1365–1373. DOI: 10.5367/te.2011.0095
[16] Gunduz, L., and Hatemi-J, A. 2005. Is the tourism-led growth hypothesis valid for Turkey? Applied Economics Letters, 12(8): 499–504. Available at: http://dx.doi.org/10.1080/13504850500109865\nand http://www.tandfonline.com/doi/abs/10.1080/13504850500109865#.VPMt6uHIPFc\nhttp://www.tandfonline.com/doi/pdf/10.1080/13504850500109865\nhttp://www.tandfonline.com/doi/abs/10.1080/13504850500109865
[17] Hye, Q.M.A., and Khan, R.E.A., 2013. Tourism-Led Growth Hypothesis: A Case Study of Pakistan. Asia Pacific Journal of Tourism Research, 18(4): 303–313. DOI: 10.1080/10941665.2012.658412
[18] Jalil, A., Mahmood, T., and Idrees, M. 2013. Tourism – growth nexus in Pakistan : Evidence from ARDL bounds tests. Economic Modelling, 35: 185–191. Available at: http://dx.doi.org/10.1016/j.econmod.2013.06.034
[19] Katircioǧlu, S. 2010. Research note: Testing the tourism-led growth hypothesis for Singapore - An empirical investigation from bounds test to cointegration and Granger causality tests. Tourism Economics, 16(4): 1095–1101. DOI: 10.5367/te.2010.0012
[20] Katircioglu, S.T. 2009. Revisiting the tourism-led-growth hypothesis for Turkey using the bounds test and Johansen approach for cointegration. Tourism Management, 30(1): 17–20. Available at: http://dx.doi.org/10.1016/j.tourman.2008.04.004
[21] Katircioğlu, S.T. 2010. International Tourism, Higher Education and Economic Growth: The Case of North Cyprus. The World Economy, 33(12): 1955–1972. Available at: http://doi.wiley.com/10.1111/j.1467-9701.2010.01304.x
[22] Khadaroo, J., and Seetanah, B. 2008. The role of transport infrastructure in international tourism development: A gravity model approach. Tourism Management, 29(5): 831–840. DOI: 10.1016/j.tourman.2007.09.005
[23] Kibara, O.N., Odhiambo, N.M., and Njuguna, J.M. 2012. Tourism and Economic Growth in Kenya : An Empirical Investigation. International Business & Economics Research Journal, 11(5): 517-528.
[24] Kreishan, F.M. 2015. Empirical Study on Tourism and Economic Growth of Bahrain : An ARDL Bounds Testing Approach. International Journal of Economics and Finance, 7(11): 1–9. Available at: http://dx.doi.org/10.5539/ijef.v
[25] Lau, E., Oh, S.-L., and Hu, S.-S. 2008. Tourist Arrivals and Economic Growth in Sarawak. Munich Personal RePEc Archive.
[26] Lean, H.H., and Tang, C.F. 2010. Is the Tourism-led Growth Hypothesis. International Journal of Tourism Research, 378: 375–378. DOI: 10.1002/jtr.759
[27] Lee, C.G., and Hung, W.T. 2010. Tourism, health and income in Singapore. International Journal of Tourism Research, 12(4): 355–359. DOI: 10.1002/jtr.755
[28] Manuel Sr., V. 2012. Tourism in El Salvador: Cointegration and Causality Analysis. Tourism Analysis, 17(3): 311–323. Available at: http://www.ingentaconnect.com/content/cog/ta/2012/00000017/00000003/art00005\n http://dx.doi.org/10.3727/108354212X13412775927862
[29] Mishra, P.K., Bout, H.B., and Mohapatra, S.S. 2011. Causality between tourism and economic growth : Empirical evidence from india. European Journal of Social Sciences, 18(4). Available at: https://www.researchgate.net/publication/280305614
[30] Narayan, P.K., et al. 2010. Tourism and economic growth: a panel data analysis for Pacific Island Countries. Tourism Economics, 16(1): 169–183.
[31] Oh, C.O. 2005. The contribution of tourism development to economic growth in the Korean economy. Tourism Management, 26(1): 39–44. DOI: 10.1016/j.tourman.2003.09.014
[32] Sinclair, M.T. 1998. Tourism and economic development: A survey. The Journal of Development Studies, 34(5): 1–51. DOI: 10.1080/00220389808422535
[33] Tang, C.F. 2011. Is the Tourism-led growth hypothesis valid for Malaysia? A View from disaggregated tourism markets. International Journal of Tourism Research, 13: 97–101. DOI: 10.1002/jtr.807
[34] Tang, C.F., and Tan, E.C. 2013. How stable is the tourism-led growth hypothesis in Malaysia ? Evidence from disaggregated tourism markets. Tourism Management, 37: 52–57. Available at: http://dx.doi.org/10.1016/j.tourman.2012.12.014
[35] Tang, C.H. (H ), and Jang, S. (S ) 2009. The tourism-economy causality in the United States: A sub-industry level examination. Tourism Management, 30(4): 553–558. Available at: http://dx.doi.org/10.1016/j.tourman.2008.09.009
Published
2017-10-12
How to Cite
PRIMAYESA, Elvina et al.
The Dynamic Relationship between Economic Growth, Tourism Activity, and Real Exchange Rate in Indonesia.
Journal of Environmental Management and Tourism, [S.l.], v. 8, n. 4, p. 798-810, oct. 2017.
ISSN 2068-7729.
Available at: <https://journals.aserspublishing.eu/jemt/article/view/1411>. Date accessed: 24 nov. 2024.
doi: https://doi.org/10.14505//jemt.v8.4(20).09.
Section
Article
Copyright© 2024 The Author(s). Published by ASERS Publishing 2024. This is an open access article distributed under the terms of CC-BY 4.0 license.