The Analysis of Asymmetries in the Nexus between Tourism and Balance of Payments Deficit: An Updated Evidence from Pakistan

Document Type : Research Paper

Authors

1 School of Business, Zhengzhou University, Henan, China; School of Economics, Quaid I Azam University, Islamabad, Pakistan; Department of Economics, University of Chakwal, Punjab, Pakistan

2 Department of Economics, International Islamic University Islamabad, Islamabad, Pakistan

Abstract

The current study intends to securitize the asymmetric link between tourism and the deficit in the balance of payments of Pakistan. To this end, the study deploys the annual data from 1976 to 2019, applying a novel cointegrating approach, viz, asymmetric Autoregressive-Distributed Lag technique. The findings confirm the non-linear cointegration among the selected series. Additionally, the results reveal that the deficit in the balance of payment responds to the positive and negative changes in tourism atypically. Besides, the balance of trade deficit, real effective exchange rate, and fiscal balance deficit exhibit a direct association with a balance of payments deficit. Based on the outcomes, the study recommends some crucial policies to encourage the tourism sector in Pakistan as it has significant potential to reduce the deficit in the balance of payments.

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Iranian Economic Review
Volume 28, Issue 1
April 2024
Pages 1-30

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