Economic Dynamics of Tourism in Nepal: A VECM Approach

Bishnu Gautam ()

MPRA Paper from University Library of Munich, Germany

Abstract: Tourism has been growing in Nepal. Tourism creates various direct, indirect and induced effects in the economy. This paper is designed to examine the role of tourism development on economic growth in Nepal. The study is based on annual data of gross domestic product, foreign exchange earnings from tourism and real effective exchange rate for the period spanning from 1975 to 2013. It examines the causality and long-run relationships between economic growth and Tourism development in Nepal using co-integration techniques and a Vector Error Correction Model (VECM). The evidence confirms that tourism development causes economic growth in short run in Nepal. The result also indicates the causality runs from both sides i.e. tourism development to economic growth and economic expansion to tourism growth implying for the greater efforts to encourage both the activities in the economy.

Keywords: Contribution of tourism; Economic dynamics; Foreign exchange earnings; tourism development; Tourism-led-growth hypothesis; Nepal (search for similar items in EconPapers)
JEL-codes: C13 F21 L83 O47 (search for similar items in EconPapers)
Date: 2014-01-01
New Economics Papers: this item is included in nep-tur
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Citations: View citations in EconPapers (1)

Published in Nepalese Economic Review 4.5(2014): pp. 1-17

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:58102

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