Impact of Tourism Development on Economic Growth of Nepal

Abstract

Nepal has a good potential for tourism development. Tourism development could lead to economic growth of destination country, however, there is a debate whether tourism causes economic growth or not. Hence, this study is conducted to examine the trend of inbound tourist arrival and tourism receipts in Nepal and to examine impact of tourism on economic growth of Nepal. To conduct study, secondary data were used which is taken for the year 1975 to 2021. The variables are rebased into common base year i.e., 2010/11. The independent variables are government consumption, gross fixed capital formation, tourism receipts and trade volume with the dependent variable gross domestic product. Unit root test was applied to examine the presence of unit root using Augmented Dickey Fuller test.Autoregressive Distributed Lag model was used to examine the impact of different independent variables on dependent variable. The results of the study showed that arrival of inbound tourist in Nepal is increasing. The foreign exchange earnings from tourism is also increasing. India, China, UK, USA, and Sri Lanka are the major countries from where the most of the tourists come to visit Nepal.The estimated long-run coefficients for government consumption, gross fixed capital formation, and trade volume are found to be positive and statistically significant, suggesting a positive relationship between economic and these independent variables. However, the results of the study showed that there is no relationship between tourist receipts and economic growth in the long run.