Modeling the Long-Run Relationship Between Exchange Rate-Tourism Pass-Through and Growth: The Case of Nigeria?

Nduka, Eleanya K. (2018): Modeling the Long-Run Relationship Between Exchange Rate-Tourism Pass-Through and Growth: The Case of Nigeria?

Abstract

This study was motivated by the urgent need to diversify the Nigerian economy away from oil. The economy has since the 1970s relied on revenue from oil with attendant consequences from oil price swings. Thus, the study employs the relatively new Bounds testing approach of Pesaran, Shin, and Smith (2001) with the critical values and approximate p-values developed by Kripfganz and Schneider (2018), to test the effect of exchange rate-tourism pass-through effect on growth. In the literature, the tourism-led growth has been studied for various countries. However, this study is the first to investigate the impact of exchange rate-tourism pass-through effect on growth in addition to testing their main effects. And it reveals for the first time, an exchange rate-tourism-led growth. Thus, Nigeria should adopt sound policies in the tourism sector that would make it possible to take advantage of the naira depreciation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Exchange rate, Tourism, Pass-through, Growth, Sector, Diversification.
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products

References

Adebayo, W. O., A. O. Jegede and D. F. Eniafe (2014). The Economic Impact of Tourism in Ile-Ife, Osun State, Nigeria. Journal of Tourism, Hospitality and Sports, 2:28-33.

Agri, E. M., O. F. Acha and B. M. Lucy (2008). Diversification of Nigeria’s Economy; Impact of Tourism on Sustainable Development in Nigeria. International Journal of Research in Humanities and Social Studies, 3(5): 36-44.

Anyanwu, J. C. (1992). President Babangida's Structural Adjustment Programme and Inflation in Nigeria. Journal of Social Development in Africa, 7(1):5-24.

Audi, M. S., A. Mohammed and A. S. Ola (2014). Industrialization and Sustainable Development in Nigeria. The International Journal of Social Sciences and Humanities Invention, 1(3): 142-154.

Bouzahzaha, M. & Y. El Menyari (2013). International Tourism and Economic Growth: The Case of Morocco and Tunisia. The Journal of North African Studies, 18(4):592–607.

Brida, J. G., E. J. S. Carrera, & W. A. Risso (2008). Tourism’s Impact on Long-Run Mexican Economic Growth. Economics Bulletin, 3(21):1-8.

Central Bank of Nigeria (2016). Foreign Exchange Rate. Research Department, Education in Economics Series 4.

Čerović, S., M. Knežević, V. Matović and I. Brdar (2015). The Contribution of Tourism Industry to GDP Growth of Western Countries. Industrija, 43(3):159-170.

Cortes-jimenez, I. and M. Pulina (2009). Inbound Tourism and Long-Run Economic Growth. Current Issues in Tourism, 13(1):61-74.

Enemou, O. B. and O. C. Oduntan (2012). Social Impact of Tourism Development on Host Communities of Osun Oshogbo Sacred Grove. Journal of Humanities and Social Science, 2(6):30-35.

Engle, R. F and C. W. J. Granger (1987). Cointegration and Error Correction: Representation, Estimation and Testing. Econometrica, 55, 255-276.

Gõkovali, U. (2006). Contribution of Tourism to Economic Growth: A Panel Data Approach. Anatolla: An lnternational Journal of Tourism and Hospitality Research, 17(2):155-167.

International Monetary Fund (2005). Nigeria: Poverty Reduction Strategy Paper— National Economic Empowerment and Development Strategy. IMF Country Report No. 05/433.

Johansen, S. and K. Juselius (1990). Maximum Likelihood Estimation and Inference on Cointegration with Applications to the Demand for Money. Oxford Bulletin of Economics and Statistics, 52, 169-210.

Kenell, L. (2008). Dutch Disease and Tourism-the Case of Thailand. Department of Economics, Lund University, Unpublished Bachelor Thesis. Available at http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=1334498&fileOId=1646600.

Keovilay, T. (2012). Tourism and Development in Rural Communities: A Case Study of Luang Namtha Province, Lao PDR. Lincoln University, Unpublished Master of Tourism Management Thesis. Available at https://core.ac.uk/download/pdf/35467155.pdf.

Kripfganz, S. and D. Schneider (2018). Response Surface Regressions for Critical Value Bounds and Approximate p-values in Equilibrium Correction Models. Available at www.kripfganz.de/research/Kripfganz_Schneider_ec.html.

Ndajiya, A., M. Shehu and H. M. Yunusa (2014). The Possible Impact of Tourism Industry on Nigeria’s Economy. Review of Public Administration and Management, 3(5):67-75.

Nduka, E. K., A. B. Ezeude, & I. J. Frederick (2017). Modeling the Impact of Tourism on Industrial Growth in Nigeria: Bound Testing Approach. Paper Presented at the 58th Annual Conference of the Nigerian Economic Society (NES) held on September 26 to 28, at NICON Luxury Hotel, Abuja, Nigeria.

Nene, G. & A. Taivan (2017). Causality Between Tourism and Economic Growth: Evidence from Sub-Saharan Africa (SSA). The Journal of Developing Areas, 51(2).

Ogiogio, G. O. (1996). A Statistical Analysis of Foreign Exchange Rate Behaviour in Nigeria’s Auction. African Economic Research Consortium, Research Paper 49.

Perles-Ribes, J. F., A. B. Ramon-Rodríguez, A. Rubia, & L. Moreno-Izquierdo (2017). Is the Tourism-led Growth Hypothesis Valid After the Global Economic and Financial Crisis? The case of Spain 1957-2014. Tourism Management, 61: 96-109.

Pesaran, M. H, Y. Shin and R. J. Smith (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16, 289-326.

Shahzad, S. J. H., M. Shahbaz, R. Ferrer, &R. R. Kumar (2017). Tourism-led Growth Hypothesis in the Top Ten Tourist Destinations: New evidence Using the Quantile-on-Quantile Approach. Tourism Management, 60: 223-232.

Valle, E. and M. N. Yobesia (2009). Economic contribution of tourism in Kenya. Tourism Analysis, 14:401-414.

Yusuff, M. A. and M. A. Akinde (2015). Tourism Development and Economic Growth Nexus: Nigeria’s Experience. European Journal of Hospitality and Tourism Research, 3(4):1-10.