Asymmetric impact of tourism on the balance of payments in Pakistan: evidence from non-linear ARDL

Abstract

PurposeThe aim of the paper is to determine the asymmetric impact of tourism on the deficit in the balance of payments (BOPs).Design/methodology/approachThe research uses the non-linear autoregressive distributed lag (ARDL) model to investigate the asymmetric impact of tourism on Pakistan's BOPs deficit using quarterly data from 1995 to 2019.FindingsThe finding reveals that due to the positive change in tourism, the BOPs deficit decreases by 27%, although due to the negative change in tourism, the BOPs deficit rises by 2.3%. In addition, the significance of F-statistics (10.609) confirms the existence of co-integration between tourism and the deficit in the BOPs. The Wald test confirms the asymmetric association between tourism and the deficit in the BOPs over the long term.Research limitations/implicationsIn order to improve tourism in Pakistan, policymakers must consider the following implications. First, there is a need for an adequate infrastructure that can help the tourist. Second, the Government must maintain a stable law and order situation as a whole and particularly at tourist destinations. Finally, the Government should develop tourism-friendly policies in order to boost tourism in Pakistan.Originality/valueThe research provides new evidence of the impact of tourism on the BOPs using the novel non-linear ARDL (NARDL) technique. The evidence will help policymakers to develop policies to improve tourism in order to reduce the BOPs deficit.

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