IS THERE A LONG-RUN RELATIONSHIP BETWEEN TOURIST ARRIVALS AND ECONOMIC GROWTH IN NEPAL? AN EMPIRICAL ASSESSMENT BASED ON ARDL BOUNDS TEST APPROACH

Abstract

The tourism industry has become a significant economic contributor to a number of countries worldwide. Until COVID-19, tourism was the world's largest and fastest-growing business. The importance of tourist arrivals and the examination of their effects has triggered curiosity among different researchers, as tourism helps in balance of payment and boosts the overall GDP of the nation. Thus, this paper aimed to examine the long-run relationship among the number of tourist arrivals per year and economic growth (proxied by GDP). The study used annual secondary data collected from World Development Indicators between 1995 and 2019. Cointegration test (ARDL bounds test) was applied to check the long-run relationship among the variables. The result shows that a 1% increase in tourist arrivals, in the long run, is associated with a 1.15% increase in GDP at a (p<0.05) significance level, other things remaining constant. The evidence from ARDL bounds cointegration test confirms that tourist arrivals have a long-run relationship with a significant impact on GDP in Nepal. Thus, this study recommends some policy implications like the allocation of government funds for infrastructure and tourism development is critical since these investments benefit the tourism industry and overall GDP of the country.