Tourism, Tourism Volatility and Economic Growth in Pakistan: New Evidence from NARDL Approach

Abstract Tourism has emerged as the world’s fastest-growing industry in the modern period. Meanwhile, its volatile nature is attracting worldwide attention, since sustainable tourism is important in light of the Sustainable Development Goals (SDGs). This study explores the non-linear relationship between international tourism, its volatility, and economic growth in Pakistan. The analysis covered the period from 1960 to 2020. The empirical analysis is carried out employing the recently popularized approach of non-linear autoregressive distributed lag (NARDL). The NARDL results suggest the asymmetrical relationship between the variable of interests in both the short term and the long term. The coefficient of positive (negative) shock for international tourism revenues has a positive (negative) sign and is statistically significant implying that every increase (decrease) in international tourism revenues leads to an increase (decrease) in economic growth. Conversely, the coefficient of positive (negative) shock for the volatility of international tourism revenue has a negative (positive) sign and is statistically significant, suggesting that any increase (decrease) in the volatility of international tourism revenue leads to a decrease (increase) in economic growth. Based on the study outcomes, the study suggests that the government of Pakistan needs to take structural measures to attain sustainable tourism that in turn increases growth sustainability.