International Remittances and International Tourism Development in South Asia: The Moderating Role of Political Stability

Muhammad Amin Hasan, Mr. Abdullah, Muhammad Arsalan Hashmi and Ali Sajid

Journal of Economic Impact, 2022, vol. 4, issue 3, 177-187

Abstract: The increasing dependence of South Asian countries on international remittances (IRM) and international tourism development (ITR) in the presence of political uncertainties has attracted scholars' attention. Although the largest receiver of IRM, South Asia fails to channel these funds to the tourism industry, which continues to operate below its potential. This study estimates the impact of IRM, political stability (PS), and their interaction with foreign direct investment (FDI) and relative price (RP) on ITR in South Asia. We used a balanced panel dataset of six South Asian countries from 1996 to 2020. We applied the pooled ordinary least squares (POLS), fixed effects (FE), feasible generalized least squares (FGLS), and Prais-Winsten regression with panel-corrected standard errors (PCSE), to estimate the results. The study discovered quite interesting and surprising results between IRM and ITR. The results suggest a statistically significant negative impact of IRM on ITR in South Asia, implying that the recipients of IRM tend to spend most of it on their basic level consumption needs and do not have incentives to save and invest. Further, the results suggest that PS positively moderates the relationship between IRM and ITR, suggesting that IRM will be channelized to the tourism sector if domestic investors expect low political risks in the region. In addition, the results indicate that PS and FDI have a statistically significant positive effect on ITR in South Asia. Moreover, RP has a negative and significant impact on ITR, implying that international tourists prefer cheaper destinations. This study provides crucial implications for South Asian economies. First, effective public policies are specifically designed for channelling IRM and FDI, focusing on enhancing the tourism industry's infrastructure. Second, PS is necessary for ITR and domestic investors to invest IRM in the tourism sector. Thus, policymakers must consider political factors while designing tourism policies and strategies. Third, the findings highlight the significance of price competitiveness for developing the tourism industry. Hence, we argue that policymakers should implement effective economic policies to stabilize regional prices to attract international tourists.

Keywords: International remittances; International tourism; Foreign direct investment; Political stability; Relative prices; South Asia (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.52223/jei4032204 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:adx:journl:v:4:y:2022:i:3:p:177-187

Access Statistics for this article

More articles in Journal of Economic Impact from Science Impact Publishers
Bibliographic data for series maintained by Iqbal Javed ().