MPRA Munich Personal RePEc Archive The Validiy of he Tourism-Led Growh Hypohesis for Thailand Komain Jiranyakul Naional Insiue of Developmen Adminisraion Augus 206 Online a hps://mpra.ub.uni-muenchen.de/72806/ MPRA Paper No. 72806, posed Augus 206 05:44 UTC
The Validiy of he Tourism Led Growh Hypohesis for Thailand Komain Jiranyakul School of Developmen Economics Naional Insiue of Developmen Adminisraion Bangkok, Thailand Email: komain_j@homail.com Absrac This paper explores he validiy of he ourism led growh hypohesis for Thailand using quarerly daa during 995 and 204. The resuls from he analysis show ha he relaionship beween ourism receips and real GDP is nonlinear wihou asymmeric adjusmen. The nonlineariy in his relaionship is found from he resuls of hreshold coinegraion ess. The causaliy analysis indicaes no causaliy running from ourism receips o real GDP in boh he long run and he shor run. The finding in his paper gives some policy implicaions. Keywords: Tourism receips, economic growh, hreshold coinegraion, Granger causaliy JEL Classificaion: C22, F4. Inroducion Besides he expor led growh hypohesis, he ourism led growh hypohesis has been widely explored by many researchers. Some researchers posi ha ourism is a long run economic growh facor. Balaguer and Canavella Jorda (2002) examine he role of ourism in he Spanish long run economic developmen. They find ha he Spanish economic growh is sensible o persisen expansion of inernaional ourism. Similarly, Nikolaos (2004) invesigaes he impac of ourism on long run economic growh in Greece under a mulivariae framework. The evidence for Greece suppors he ourism led growh hypohesis. Carrera e al. (2008) examine he impac of ourism on long run economic growh in Mexico and find evidence of he validiy of he ourism led growh hypohesis from he resuls of a linear coinegraion analysis. However, Oh (2005) finds ha he ourism led growh hypohesis does no hold for Souh Korea. Recenly, Erugrul and Mangir (205) validae he ourism led growh hypohesis for Turkey. Phiri (205) employs boh linear and nonlinear coinegraion ess and finds evidence ha suppors he ourism led growh hypohesis for Souh Africa under he linear coinegraion analysis. On he conrary, Brida e al. (206) examine he validiy of he ousim led growh hypohesis for Argenina and Brazil using boh linear and nonlinear coninegraion echniques. They find ha he ourism led growh hypohesis holds only in he case of Brazil under a nonlinear coinegraion model analysis. For Souheas Asian economies, Lee and Hung (200) find ha ourism imposes a posiive impac on Singapore s economic developmen in he long run. This finding is found under Granger causaliy analysis. Tang (20) reinvesigaes he validiy of ourism led growh hypohesis for Malaysia during January 995 and February 2009 using linear coinegraion analysis and finds ha inernaional ourism arrivals and economic growh exhibi a long run relaionship in all 2 differen disaggregaed ourism markes of he counry. Unong (204) employs linear coinegraion echniques o examine he validiy of he ourism led growh hypohesis for Thailand and finds ha his hypohesis is valid during 980 202, bu is no valid during 960 o 979. Therefore, he level of ourism specializaion seems o play an imporan par in he ourism growh nexus.
Tourism receips are one of main sources of foreign exchange income for Thailand and oher emerging marke economies. In addiion, ourism developmen can creae employmen opporuniies in he ourism secor. Tourism indusry has been gradually more imporan o he Thai economy. In 2005, he raio of ourism receips and oal expors of he counry was 9 percen. This raio increased o 5 percen in 204. The average raio was approximaely 2 percen per annum. The growing imporance of ourism can enhance economic growh for he Thai economy. This paper aemps o invesigae wheher ourism leads o economic growh by using he recenly available quarerly daa during 2005 and 204. In oher words, he paper ess he ourism led growh hypohesis for Thailand. To answer his empirical issue, boh linear and non linear coinegraion ess are used. The possibiliy of nonlineariy in he ourism growh nexus has been ignored in many previous sudies. The presen paper conribues o he lieraure because i provides evidence ha he significanly posiive long run relaionship beween ourism receips and real GDP is nonlinear. The paper is organized as follows. The nex secion describes he daa and empirical mehodology. Secion 3 presens empirical resuls. Concluding remarks are in Secion 4. 2. Daa and Mehodology 2. Daa The daa from 2005Q o 204Q4 are used o examine he validiy of he ourism led growh hypohesis. The series of ne ourism receips and consumer price index are obained from he websie of he Bank of Thailand. The series of real ourism receips is obained by deflaing he series of ne ourism receips by consumer price index. The series of real GDP is obained from he daabase of he Naional Economic and Social Developmen Board. Boh series are expressed in billion of bah (domesic currency). All series are ransformed ino logarihmic series. 2.2 Esimaion mehods Since he long run relaionship beween ourism receips and real GDP can be linear or nonlinear, wo ypes of ess for coinegraion are used: () EG coinegraion es and (2) hreshold coinegraion ess. The EG coinegraion es of Engle and Granger (987) comprises wo seps of esimaion. The firs sep is he OLS esimae of he long run equilibrium relaionship, which is expressed as: gdp 0 r e () where gdp is he log of real GDP, and r is he log of real ourism receips, and e is he error erm. The second sep is he es for uni roo in he esimaed residual (e) by he following equaion: e e u (2) e where he saisic of he coefficien of he lagged residual erm is compared wih he criical value provided by MacKinnon (99). If he saisic is larger han he criical value saisic, he null hypohesis of no coinegraion is rejeced. On he conrary of he saisic is smaller han he criical value saisic, he null hypohesis is acceped. The EG coinegraion es implicily assumes a linear adjusmen mechanism. However, his es is misspecified when he adjusmen is asymmeric. The number of ouriss or he number of ouris arrivals does no seem o be suiable because differen ypes of inernaional ouriss spend differen amouns of money. Therefore, ourism receips are used. 2
The models ha ake ino accoun of asymmeric adjusmen mechanism are recenly developed for coinegraion ess. There are modified models of he EG es. The firs model is known as hreshold auoregressive model (TAR) developed by Enders and Granger (998) and Enders and Siklos (200), which is a nonlinear exension of he EG framework. The nonlinear coinegraion funcion is specified as: e I v (3) e ( I ) 2e where is firs difference operaor, I is he Heaviside indicaor funcion such ha I is one if e is greaer han or equal o τ and I is zero if e is smaller han τ, and τ is he value of he hreshold. The lagged firs difference of he error erm can be augmened o Eq. (3). According o he TAR model, he necessary and sufficien condiions for he sequence of e is ρ is less han zero, ρ 2 is less han zero, and (+ρ )(+ρ 2 ) is less han one. Since he value of τ is unknown, his value is o be esimaed. In some circumsance, he value of τ migh be se o zero so ha he coinegraing vecor coincides wih he aracor. For he momenum hreshold auoregressive (MTAR) model, he Heaviside indicaor funcion in Eq. (3) is defined as M, which is one if e is greaer han or equal o τ, and i is zero if e is less han τ. If he hreshold coinegraion is found, one can proceed wih he Granger causaliy es by he hreshold error correcion model (TECM). The TECM is specified as: gdp Z 2 Z ) k k i gdp i i r ( u (4) i where Z Ie ; M e and ( Z ) ( I ) e ;( M ) e depending on he ype of he hreshold models specified above. The join significance of wo of he λ coefficiens indicaes longrun causaliy and he join significance of Ф i s indicaes shor run causaliy. The lagged firs difference of he righ hand side variables can be deermined by Schwarz informaion crierion. 3. Empirical Resuls Among various convenional uni roo esing procedures, he PP es of Phillips and Perron (988) is used o es for saionariy propery of each variable wih a small sample size. The resuls are repored in Table. Table Resuls of PP ess for uni roo, 995Q 204Q4. Variable PP saisic (consan) Bandwidh gdp.066 5 gdp 2.939*** r.633 9 r 0.757*** 2 Noe: *** denoe significance a he percen level. The resuls in Table reveal ha he real GDP and ourism receips series are no saionary in heir level, bu saionary in heir firs differences. Therefore, i can be argued ha boh series are I() series. 3
Due o he possibiliy on nonlineariy saionariy of variables, he non lineariy saionary es proposed by Kapenious e al. (2003) can be used o es wheher he wo series are nonlinear saionary. The approximaed equaion of his es can be expressed as: x 3 k x b x u (5) i i where x is he series of variables in quesion, u is an i.i.d. error wih zero mean and consan variance. The null hypohesis ha 0 is esed agains he alernaive hypohesis ha 0. The accepance of he null hypohesis indicaes he presence of uni roo in a series and vice versa. The resuls of nonlinear uni roo ess are repored in Table 2. Table 2 Resuls of nonlinear uni roo ess, 995Q 2004Q4. saisic lag gdp 0.00 3 gdp 74.666*** 3 r 0.002 3 r 2.45** 3 Noe: The opimal lag lengh is deermined by Schwerz Informaion Crierion, *** and **denoes significance a he and 5 percen, respecively. The resuls in Table 2 sugges ha he variables are I() series. The ess are significan a leas a he 5 percen level. Therefore, he TAR and MTAR models are suiable for nonlinear coinegraion ess. The esimaes of he second sep of he EG model and he shor run adjusmen beween real GDP and ourism receips under he TAR and MTAR models are repored in Table 3. Table 3 Esimaes of he shor run adjusmen beween ourism receips and real GDP, 995Q 204Q4. EG es Threshold (τ=0) Momenum (τ=0) ρ 3.026 (0.80) 0.6 (0.93) 0.68 (0.96) ρ 2 0.524 (0.244) 0.560 (0.260) Ј 0 0 Ф 7.33 7.20 ρ =ρ 2 0.078 0.033 Noe: Sandard error in perenhesis, J is he lag lengh, Ф is he join F es for he null hypohesis ha ρ =ρ 2 =0. The second column of Table 3 repors he resuls of EG coinegraion es. The ADF es is performed on he residual series obained from he esimae of he long run equilibrium equaion, Eq. (), wih one period lag of he augmened erm. The ADF saisic is 3.026, which is smaller han he criical value of 3.30 a he 0 percen level. Therefore, he null hypohesis of uni roo in he residuals canno be rejeced. In oher words, here is no long run relaionship beween real GDP and real ourism receips under he analysis of coinegraon by he EG es, which is a linear adjusmen model. 4
For he hreshold coinegraion models specified in Eq. (3), he hreshold value is se o zero for boh TAR and MTAR models. The esimaed coefficiens, ρ and ρ 2, are repored in columns 3 and 4. The absolue values of hese coefficiens are less han one. Recall ha hese negaive values of hese coefficiens mee he requiremen of necessary condiion for convergence. In addiion, he sufficien condiion for convergence is also me. The Ф saisic for he null hypohesis ha ρ =ρ 2 =0 lead o a rejecion of he null hypohesis of no coinegraion a he 0 percen level in boh models. However, he es saisic for he null hypohesis ha ρ =ρ 2 canno be rejeced. Therefore, i can be concluded ha here is coinegaion beween real GDP and ourism receips wihou asymmeric adjusmen in he shor run. For he esimaes of he residuals for boh TAR and MTAR models, he hreshold value is esimaed using he sequenially deermined hresholds mehod ha minimizes he sum of squared errors. The hreshold value is 0.035. Wih posiive value of he hreshold, he esimaion resuls are repeaed. I is found ha he resuls are similar o he resuls in Table 3. The repeaed esimaion resuls are shown in Table 4. Table 4 Esimaes of he shor run adjusmen beween ourism receips and real GDP, 995Q 204Q4. Threshold (τ=0.035) Momenum (τ=0.035) ρ 0.563 (0.202) 0.588 (0.78) ρ 2 0.596 (0.228) 0.550 (0.288) Ј 0 0 Ф 7.284 7.285 ρ =ρ 2 0.0 0.03 Noe: Sandard error in perenhesis, J is he lag lengh, Ф is he join F es for he null hypohesis ha ρ =ρ 2 =0. The resuls in Table 4 show ha here is nonlinear long run relaionship beween real GDP and ourism receips, bu wihou asymmeric adjusmen. 2 The exisence of nonlinear coinegraion wihou asymmeric adjusmen leads o an inerpreaion of he long run relaionship beween ourism receips and real GDP as shown in Table 5. Table 5 Esimae of he long run relaionship beween ourism receips and real GDP, 995Q 204Q4. Dependen variable: gdp Variable Coefficien Sd. Error saisic p value r 0.23*** 0.23 9.239 0.000 Inercep 6.44*** 0.062 03.056 0.000 Noe: *** indicaes significance a he percen level. 2 The F saisic or Ф saisic will lead o a rejecion of coinegraion if only one coefficien, ρ i, is negaive when he null hypohesis 2 0 is esed. In his paper, he wo coefficiens are negaive. Therefore, he es should be suiable. 5
In Table 5, a percen increase in real ourism receips leads o 0.23 percen increase in real GDP. In he sense of causaliy, he esimae of Eq. (4) using he MTAR model is repored in Table 6. Table 6 Esimae of he long run and shor run causaliy, 995Q 204Q4. Dependen variable: gdp Variable Coefficien saisic p value M e 0.26 0.43 0.670 ( M )e 0.375 0.842 0.362 gdp 0.448.463 0.55 gdp 2 0.244 0.842 0.407 gdp 3 0.033 0.7 0.907 r 0.006 0.03 0.98 r 2 0.060 0.998 0.327 r 3 0.27** 2.448 0.02 Noe: ** denoes significance a he 5 percen level. The resuls in Table 6 show ha he coefficiens of he hreshold error correcion erms for boh higher and lower regimes are insignifican. Therefore, here is no long run causaliy running from ourism receips o real GDP. The join Wald F es also indicaes no long run causaliy (F=0.485 wih p=value = 0.62). In addiion, he join Wald F es for shor run causaliy gives he F saisic = 2.253 wih p value = 0.0, and hus he es also rejecs he exisence of he shor run causaliy. The main finding in his paper suppors he validiy of he ourism led growh hypohesis under he framework of nonlinear coinegraion ess, which is conrary o he finding by Oh (2005) for Souh Korea. However, he finding is line wih oher sudies, such as hose of Blaguer and Canavellar Jorda (2002) for Spain, Nikolaos (2004) for Greece, Carrera e al. (2008) for Mexico, Erugrul and Mangir (205) for Turkey, and Brida e al. (206) for Brazil. In he case of Brazil, coinegraion wih asymmeric adjusmen is found under he analysis of he MTAR model. In a cross counry analysis, Adamou and Clerides (2008) find ha specializaion in he ourism secor can simulae economic growh wih diminishing reurns. In oher words, he conribuion of ourism will become minimal afer a cerain level of specializaion is reached. However, he level of specializaion for Thailand migh no be maure enough. Therefore, he conribuion of ourism o economic growh will coninue in he fuure. Based upon he resuls from his paper, ourism developmen seems o be necessary. 4. Concluding Remarks The validiy of he ourism led growh hypohesis has been quie widely explored by many researchers using convenional or linear coinegraion echniques. However, he long run relaionship beween real GDP and ourism receips ha canno be deeced by any linear coinegraion es migh indicae he possibiliy of a nonlinear relaionship beween he wo variables. In his paper, hreshold coinegraion ess become relevan in ha he ess allow for nonlineariy in he underlying daa generaing process of variables. Recen quarerly daa are available from he firs quarer of 2005 o he fourh quarer of 204. The daa are applied o boh linear and nonlinear coinegraion ess. One of he imporan finding in his paper is he presence of a nonlinear long run relaionship beween real GDP and ourism receips for Thailand. Even hough he adjusmen oward long run equilibrium is no asymmeric, bu he adjusmen is nonlinear. Furhermore, here is no causaliy running from ourism receips o economic growh in boh he long run and he shor run. Based upon he resuls from his sudy, susainable developmen of ourism seems o be necessary since i can be one of he main facors enhancing real GDP and hus 6
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