Taking flight: Exploring the relationship between air transport and Malaysian economic growth

Abstract

All facets of the tourism business, especially air travel, have been affected by the COVID-19 pandemic. The aviation industry continues to contribute to international economic expansion significantly. The article aims to identify the impact of the development of air transport on the economic development of the Malaysian economy. Therefore, the air-transportation-led growth hypothesis (ALGH) was investigated by examining whether airline travel boosts the Malaysian economy. The effects of air passengers (a stand-in for tourism) on Malaysia's GDP were examined in the long and short term. This study analyzed Data for Malaysia using an autoregressive distributed lag (ARDL) technique. The time covered was from 1970 to 2020. Certain control variables (i.e., energy consumption, financial development, social globalization, and urbanization) were also analyzed to see how they influenced economic expansion. Statistically significant effects of air travel on GDP were found in both the short and long term of this study, suggesting that this mode of transportation contributes to the sustained expansion of Malaysia's economy. Several methods, including Canonical Cointegration Regression (CCR), Dynamic Ordinary Least Squares (DOLS), and Fully Modified Ordinary Least Squares (FMOLS), were used to verify the results independently. The article offers legislative suggestions for improving the aviation industry's productivity, security, and bottom line.