DYNAMIC CAUSAL ASSOCIATION BETWEEN TOURISM AND MACROECONOMIC VARIABLES: EMPIRICAL EVIDENCE FROM PAKISTAN
This research paper made an effort to define the association between Tourism and macroeconomic variables (Economic growth, Exchange rate, current account deficit and inflation). The objective is to discover if the association is unidirectional or bidirectional. For this purpose annual data has been used since 1995 to 2018. Furthermore, Cointegration has been calculated using Johansen’s cointegration assessment on time series data to find if a long-run affiliation exists among the variables. Before the cointegration test, it is desirable to find the static of the series for which Augmented Dickey-Fuller technique used at first difference. Because of the existence of cointegration, there is a possibility of short-run disequilibrium, so Vector Error Correction Model (VECM) is utilized to examine the disturbances of divergence or convergence finally Granger causality/Block exogeneity test is useful to find the causal relationship among variables, it also specifies unidirectional relationship or bidirectional relationship. As a result, it is found that there is a significance co-integration equation which shows the existence of long-term affiliation among series. Moreover, there is also an indication of short-run affiliation among variables. Finally, by using Granger causality test we identified one-way causal relationship, from tourism to current account balance, from economic growth to tourism and from exchange rate to CPi and current account balance. Furthermore, there is a two-way causality existence found between current account balance and inflation (CPi).
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