American Journal of Theoretical and Applied Statistics

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Investigating Nepal’s Gross Domestic Product from Tourism: Vector Error Correction Model Approach

Received: 31 August 2016    Accepted: 09 September 2016    Published: 28 September 2016
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Abstract

This study tries to examine long run and short run relationship of foreign exchange earnings from tourism and average expenditure of international tourists towards share of gross domestic product (GDP) of Nepalese tourism by using Vector Error Correction Model (VECM). A multivariate time series analysis has been applied from the period of 1991 to 2014 tourism data of Nepal. The results of Johansen test of co-integration indicates there is one co-integrated vector under 4 lags of length among the share of gross domestic product of Nepalese tourism, foreign exchange earnings from tourism and average expenditure of international tourist. The long run relationship based on vector error correction model has indicated that coefficient of GDP elasticity with respect to average expenditure per visitor is more elastic as compare to coefficient of GDP elasticity with respect to foreign exchange earnings from tourism. The results of Granger causality analysis have depicted that there exists bidirectional causal relationship between GDP and expenditure per visitor and unidirectional causal relationship exists between GDP and foreign exchange earnings from tourism.

DOI 10.11648/j.ajtas.20160505.20
Published in American Journal of Theoretical and Applied Statistics (Volume 5, Issue 5, September 2016)
Page(s) 311-316
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Augmented Dickey Fuller Test, Co-integration, Error Correction, Granger Causality

References
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[2] Ganesh, A. and Madhavi,C.(2007).Impact of tourism on Indian economy-A snapshot.Journal of contemporary research in management1:235-240.
[3] Baggio, R. (2008). Symptoms of complexity in a tourism system. Tourism analysis13:1-20.
[4] Briassoulis,H. and Straaten, J.V.D.(1999).Tourism and environment-regional, economic, cultural and policy issues (environment and assessment).Springer, USA, vol.6.
[5] Berger,V.(1978).The Economic Impact of Tourism in Nepal: An Input Output Analysis. Phd, Faculty of the Graduate School, Cornell University, Austria.
[6] Khadka,K.R. (1993). Tourism and Economic Development in Nepal. Phd, University of Bradford, UK.
[7] Pradhananga, S.B. (2000).Tourists’ Consumption Pattern and Its Economic Impact in Nepal. Phd, Central Department of Economics, Tribhuvan University, Nepal.
[8] Shrestha,H.P. (1998). Tourism Marketing in Nepal. Phd, Faculty of Management, Tribhuvan University, Nepal.
[9] Sharma,O.P.(2001).Tourism Development and Planning in Nepal. Phd, Faculty of Social Sciences, Banaras Hindu University, India.
[10] Upadhyaya, R.P. (2004).A Study of Tourism as leading Sector in Economic Development of Nepal. Phd, Department of Economics,University of Lucknow,India.
[11] Gautam, B.P. (2011). Tourism and economic growth in Nepal.NRB Economic Review 23:18-30.
[12] Dhungel,K.R. (2015).An economic analysis on the relationship between tourism and economic growth: Empirical evidence from Nepal.International Journal of economics and financial management3(2):84-90.
[13] Paudyal, S.R. (2012). Does tourism really matter for economic growth? Evidence from Nepal.NRB Economic Review 24:58-89.
[14] MOTCA (2009-2014).Ministry of Tourism and Civil Aviation. Nepal Tourism Statistics. Government of Nepal.
[15] Dickey, D. and Fuller W. (1979).Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Journal of the American Statistical Association 74: 427-431.
[16] Dickey, D. and Fuller W. (1981). Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometrica49: 1057-1072.
[17] Mukhtar,T. and Rasheed, S.(2010). Testing long run relationship between exports and imports: Evidence from Pakistan. Journal of Economic Cooperation and Development, 31:41-58.
[18] Johansen, S. (1988).Statistical analysis of co-integration vectors.Journal of Economic Dynamics and Control 12:231-254.
[19] Johansen, S. (1995).Likelihood- based inference in co-integrated vector autoregressive model. Oxford: Oxford University Press.
[20] Becketti, S. (2013).Introduction to time series using stata.College Station’s: Stata Press.
[21] Granger, C.W.C. (1981).Some properties of time series data their use in econometric model specification.Journal of Econometrics 16:121-130.
[22] Breusch,T.S. and Pagan,A.R.(1980). The Lagrange multiplier test and its applications to model specification in econometrics. Review of Economic Studies 47:239-253.
[23] Davidson, R. and Mackinnon, G. (1993).Estimation and Inference in Econometrics. New York: Oxford University Press.
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Author Information
  • Central Department of Statistics, Tribhuvan University, Kathmandu, Nepal

  • Central Department of Statistics, Tribhuvan University, Kathmandu, Nepal

  • Central Department of Statistics, Tribhuvan University, Kathmandu, Nepal

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    Basanta Dhakal, Azay Bikram Sthapit, Shankar Prasad Khanal. (2016). Investigating Nepal’s Gross Domestic Product from Tourism: Vector Error Correction Model Approach. American Journal of Theoretical and Applied Statistics, 5(5), 311-316. https://doi.org/10.11648/j.ajtas.20160505.20

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    ACS Style

    Basanta Dhakal; Azay Bikram Sthapit; Shankar Prasad Khanal. Investigating Nepal’s Gross Domestic Product from Tourism: Vector Error Correction Model Approach. Am. J. Theor. Appl. Stat. 2016, 5(5), 311-316. doi: 10.11648/j.ajtas.20160505.20

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    AMA Style

    Basanta Dhakal, Azay Bikram Sthapit, Shankar Prasad Khanal. Investigating Nepal’s Gross Domestic Product from Tourism: Vector Error Correction Model Approach. Am J Theor Appl Stat. 2016;5(5):311-316. doi: 10.11648/j.ajtas.20160505.20

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  • @article{10.11648/j.ajtas.20160505.20,
      author = {Basanta Dhakal and Azay Bikram Sthapit and Shankar Prasad Khanal},
      title = {Investigating Nepal’s Gross Domestic Product from Tourism: Vector Error Correction Model Approach},
      journal = {American Journal of Theoretical and Applied Statistics},
      volume = {5},
      number = {5},
      pages = {311-316},
      doi = {10.11648/j.ajtas.20160505.20},
      url = {https://doi.org/10.11648/j.ajtas.20160505.20},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ajtas.20160505.20},
      abstract = {This study tries to examine long run and short run relationship of foreign exchange earnings from tourism and average expenditure of international tourists towards share of gross domestic product (GDP) of Nepalese tourism by using Vector Error Correction Model (VECM). A multivariate time series analysis has been applied from the period of 1991 to 2014 tourism data of Nepal. The results of Johansen test of co-integration indicates there is one co-integrated vector under 4 lags of length among the share of gross domestic product of Nepalese tourism, foreign exchange earnings from tourism and average expenditure of international tourist. The long run relationship based on vector error correction model has indicated that coefficient of GDP elasticity with respect to average expenditure per visitor is more elastic as compare to coefficient of GDP elasticity with respect to foreign exchange earnings from tourism. The results of Granger causality analysis have depicted that there exists bidirectional causal relationship between GDP and expenditure per visitor and unidirectional causal relationship exists between GDP and foreign exchange earnings from tourism.},
     year = {2016}
    }
    

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    T1  - Investigating Nepal’s Gross Domestic Product from Tourism: Vector Error Correction Model Approach
    AU  - Basanta Dhakal
    AU  - Azay Bikram Sthapit
    AU  - Shankar Prasad Khanal
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    DO  - 10.11648/j.ajtas.20160505.20
    T2  - American Journal of Theoretical and Applied Statistics
    JF  - American Journal of Theoretical and Applied Statistics
    JO  - American Journal of Theoretical and Applied Statistics
    SP  - 311
    EP  - 316
    PB  - Science Publishing Group
    SN  - 2326-9006
    UR  - https://doi.org/10.11648/j.ajtas.20160505.20
    AB  - This study tries to examine long run and short run relationship of foreign exchange earnings from tourism and average expenditure of international tourists towards share of gross domestic product (GDP) of Nepalese tourism by using Vector Error Correction Model (VECM). A multivariate time series analysis has been applied from the period of 1991 to 2014 tourism data of Nepal. The results of Johansen test of co-integration indicates there is one co-integrated vector under 4 lags of length among the share of gross domestic product of Nepalese tourism, foreign exchange earnings from tourism and average expenditure of international tourist. The long run relationship based on vector error correction model has indicated that coefficient of GDP elasticity with respect to average expenditure per visitor is more elastic as compare to coefficient of GDP elasticity with respect to foreign exchange earnings from tourism. The results of Granger causality analysis have depicted that there exists bidirectional causal relationship between GDP and expenditure per visitor and unidirectional causal relationship exists between GDP and foreign exchange earnings from tourism.
    VL  - 5
    IS  - 5
    ER  - 

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