Asymmetric impact of tourism on the balance of payments in Pakistan: evidence from non-linear ARDL

Asim Rafiq, Ameer Muhammad Aamir and Muhammad Nadeem

Journal of Economic and Administrative Sciences, 2021, vol. 39, issue 4, 1210-1225

Abstract: Purpose - The aim of the paper is to determine the asymmetric impact of tourism on the deficit in the balance of payments (BOPs). Design/methodology/approach - The research uses the non-linear autoregressive distributed lag (ARDL) model to investigate the asymmetric impact of tourism on Pakistan's BOPs deficit using quarterly data from 1995 to 2019. Findings - The finding reveals that due to the positive change in tourism, the BOPs deficit decreases by 27%, although due to the negative change in tourism, the BOPs deficit rises by 2.3%. In addition, the significance ofF-statistics (10.609) confirms the existence of co-integration between tourism and the deficit in the BOPs. The Wald test confirms the asymmetric association between tourism and the deficit in the BOPs over the long term. Research limitations/implications - In order to improve tourism in Pakistan, policymakers must consider the following implications. First, there is a need for an adequate infrastructure that can help the tourist. Second, the Government must maintain a stable law and order situation as a whole and particularly at tourist destinations. Finally, the Government should develop tourism-friendly policies in order to boost tourism in Pakistan. Originality/value - The research provides new evidence of the impact of tourism on the BOPs using the novel non-linear ARDL (NARDL) technique. The evidence will help policymakers to develop policies to improve tourism in order to reduce the BOPs deficit.

Keywords: Non-linear ARDL; Tourism; Balance of payment; Co-integration; Asymmetry (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jeaspp:jeas-12-2020-0212

DOI: 10.1108/JEAS-12-2020-0212

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