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Tourism-Growth Nexus in the South Pacific Islands: Role of Financial Sector Development as a Contingent Factor An Empirical Study of Fiji: 1980-2014

Jayaraman, Tiru and Choong, Chee-Keong and Fatt Ng, Cheong and Bhatt, Markand (2017): Tourism-Growth Nexus in the South Pacific Islands: Role of Financial Sector Development as a Contingent Factor An Empirical Study of Fiji: 1980-2014.

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Abstract

Tourism in recent years has emerged as the engine of growth in Pacific island countries. In Fiji in particular, it has relegated its traditional sugar exports to third place. Besides the steadily increasing air passenger traffic, there has been a rising trend in cruise ship arrivals. Short visits by cruise ship travelers have become additional sources of income for a host of small scale tourist operators and vendors, most of them being outside the informal sector in around its two major ports. In this context, financial inclusion efforts have assumed greater importance as these incomes in some part can find their way as savings into banks. The role of financial sector development (FSD) has thus become a critical factor in the tourism-growth nexus. This paper finds while the FSD indicator when individually employed, whether as broad money or bank credit to private sector is supportive of the growth nexus, the interaction term is has emerged with a negative sign indicating that FSD does not play a complementary role. The financial sector of Fiji is still shallow, despite considerable progress in financial inclusion efforts, measures towards deepening of FSD depend not on one front of mobilization of savings, but on all round progress in various segments of financial sector.

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