Nexus between Economic Growth, Tourism Revenue and Financial Development in Bangladesh: A Time Series Analysis

Syeda Sumaiya Habib,Md Shahanawaz Sharif,Mohammad Amzad Hossain

doi:10.5296/ber.v9i3.15068

Syeda Sumaiya Habib, Md Shahanawaz Sharif + Show 1 more

Open Access

https://doi.org/10.5296/ber.v9i3.15068

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Abstract

The main objective of this study is to analyze the nexus between economic growth, tourism revenue, and financial development in Bangladesh. This paper uses time series data from 1995 to 2016. Advance technique of time series analysis: Johansen Cointegration Approach is used to test the Cointegration among variables. Moreover, the Vector Error Correction (VECM) has been applied to study the long run and short run association among variables. The outcome of this study reveals that the tourism revenue and financial development has positive impact on economic growth in the long run. Variance decomposition and impulse response function also supports the positive association. According to the estimation of Granger Causality also reveals the unilateral direction in short run economic growth to tourism revenue. Providing more credit by financial sector to invest more on infrastructure and promoting Bangladesh as well as insuring proper security for foreign visitors would increase the revenue of this sector, which in turn stimulates economic growth of the country.

Highlights

The travel and tourism sector become an important driver of Bangladesh’s economy
The outcome of this study reveals that the tourism revenue and financial development has positive impact on economic growth in the long run
Tourism revenue (TR), Gross domestic product (GDP), Domestic credit provided by financial sector (DCFS) and Broad Money (M2) are employed to address the objectives of the study

Summary

Introduction

The travel and tourism sector become an important driver of Bangladesh’s economy. It is one of the emerging sectors of Bangladesh. NHTTI experienced major changes in 2010 after the collaboration of Bangladesh Tourism Board and United Nations World Tourism Organization (UNWTO). A major portion of income is generated from this sector, which is on average $0.076.With the enhancement of this sector, economic, social and environmental benefit can be ensured. This can support the country’s Balance of Payment (BOP) and will help people to exchange their cultural values

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Results

Conclusion