Aggregated and Disaggregated Market Approach to Tourism Led Growth Hypothesis in Pakistan

Abstract

The study investigates the relationship between tourism and economic growth for the economy of Pakistan. Tourism led growth hypothesis has been tested for annual data at the aggregate and the disaggregated market approach. Tourism led growth hypothesis has been tested at the aggregate level for the period of 1969-2016 through a combined co-integration test, vector error correction mechanism bi-directional causality, and uni-directional causality. The results show that tourism and economic growth have a long-run relationship, bi-directional causality in the long run, and unidirectional causality runs from tourism to economic growth in the short run. At the disaggregated level, the results show that out of 10 tourism markets only 2 markets i.e Canada and Germany support Tourism led growth hypothesis in the short run. However, 7 out of 10 tourism markets in the long run. In conclusion, the tourism-led growth hypothesis is valid in Pakistan in both cases; aggregated and disaggregated markets approach.