The Effect of Macroeconomic Policy towards Tourism in Malaysia

This study aims to investigate the existence of the relationship between tourism, growth and macroeconomic policy in the case of Malaysia. For that purpose, structure-based co-integration test autoregressive distributed lag (ARDL) is used. Variables used are growth (GDP), real effective exchange rate (REER), government spending (EXPM) and the economic crisis (CR). Data from 1980 to 2009 for 10 selected countries, namely Brunei, Thailand, Indonesia, United Kingdom, United States of America (USA), Singapore, Japan, India, Australia and China are used. This study found that the unit root test which refer to the Augmented Dickey Fuller (ADF) for all variables are stationary in levels and at the first difference [I (0) and I (1)]. The co-integration test found that the long-term relationship exists for all countries. Real effective exchange rate (REER) is a very important variable affecting tourist arrivals as compared to the others for instance the EXPM. EXPM only important for a few countries, namely Australia, Brunei, Singapore, Thailand and the United Kingdom. Based on the country analysis, it is found that each countries obtain different results. Australia for example, there are three the most important variables that influence the arrivals namely GDP, EXPM and REER, while for Brunei and the United Kingdom only EXPM is the significant variable affecting tourist arrivals. The GDP, REER and CR have been found as the significant variables for China and the United States.