How stable is the tourism-led growth hypothesis in Malaysia? Evidence from disaggregated tourism markets

We contribute to the tourism-growth literature by applying the newly developed combined cointegration test and the recursive Granger causality test to re-assess the stability of the tourism-led growth hypothesis in Malaysia with respect to 12 different tourism markets. The cointegration test results suggest that economic growth of Malaysia is cointegrated with all the 12 selected tourism markets. However, the recursive Granger causality test shows that the tourism-led growth hypothesis in Malaysia is valid and stable with respect to tourist arrivals from only 8 out of the 12 tourism markets. Almost all of them are from developed countries. Hence, not all international visitor arrivals could effectively drive the growth of the Malaysian economy. In light of this, tourism marketing policies should focus more on those tourism markets that could significantly stimulate economic growth. However, there should not be total neglect of others as they potentially contribute to the economies of scale.

► The validity and stability of the tourism-led growth hypothesis in Malaysia are examined.
► The hypothesis is tested with data on tourist arrivals from 12 different tourism markets.
► Tourism and national output are found to be cointegrated with respect to all tourist arrivals.
► The tourism-led growth hypothesis is valid and stable in 8 out of 12 tourism markets.
► Marketing policies should pay attention to these 8 tourism markets.