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The Validity of the Tourism-Led Growth Hypothesis for Thailand

Jiranyakul, Komain (2019): The Validity of the Tourism-Led Growth Hypothesis for Thailand.

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Abstract

Previous empirical studies have mainly applied linear cointegration analysis to find the relationship between tourism receipts and real GDP in the long run. However, some studies fail to find this relationship due to its complex nature. This paper explores the validity of the tourism-led growth hypothesis for Thailand using quarterly data from 2006 to 2017. The results from the residual-based test for cointegration show that the positive long-run relationship between tourism receipts and real GDP is linear when taking into account the existence of structural breaks. Nevertheless, the results from short-run dynamics reveal that this long-run linear relationship is not stable because any deviation from the long-run equilibrium will not be corrected. The possibility of a nonlinear long-run relationship is also examined by using threshold cointegration tests. The estimated MTAR model indicates the existence of nonlinear cointegration without asymmetric adjustment towards the long-run equilibrium. In a causality sense, the main finding suggests that there is long-run causality running from tourism receipts to real GDP in the higher regime or above the threshold level. On the contrary, short-run causality running from tourism receipts to real GDP is observed in the lower regime or below the threshold value. The overall results seem to suggest that the tourism-led growth hypothesis holds for Thailand.

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