Received February 2010 Revised March 2010 Accepted April 2010
An exploration of dynamic relationship between tourist arrivals, inﬂation, unemployment and crime rates in Malaysia Chor Foon Tang
Department of Economics, Faculty of Economics and Administration, University of Malaya, Kuala Lumpur, Malaysia Abstract
Purpose – The main purpose of this study is to examine the dynamic relationship between tourist arrivals, inﬂation, unemployment and crime rates in Malaysia. This study covered the annual data from 1970 to 2008. Design/methodology/approach – The multivariate Johansen-Juselius cointegration test is employed to examine the potential long-run equilibrium relationship. While the Granger causality test within the vector error-correction modelling (VECM) framework is applied to determine the causal relationship between crime rate and its determinants. Findings – The Johansen-Juselius cointegration test result reveals that the variables are cointegrated and the dynamic ordinary least squares estimator suggest that unemployment, inﬂation and tourist arrivals are positively related to crime rates in Malaysia. For Granger causality, in the long-run tourist arrivals, inﬂation and unemployment rates Granger cause crime rate in Malaysia. However, in the short run we ﬁnd bilateral causality between unemployment, crime and tourist arrivals. Finally, the variance decompositions and impulse response functions analyses implied that unemployment, inﬂation and tourist arrivals are important in explaining the variation in crime for Malaysia. Originality/value – The estimated crime rate function for Malaysia demonstrated that promoting supply-side economy and also increases the numbers of police and patrolling duties in the potential crime areas will reduce the crime rate in Malaysia and in the same time attract more tourist arrivals to Malaysia. Keywords Crimes, Inﬂation, Unemployment, Tourism, Malaysia Paper type Research paper
1. Introduction Throughout almost two decades since 1990, reducing crime rate in Malaysia has been viewed as an urgent task for policymakers and also the Royal Malaysian Police (RMP) department, because it has a deep impact on socio-economics development. Beginning from the twentieth century, crime rate in Malaysia has increased tremendously. The statistics compiled by RMP shows that crime rate in Malaysia surged from 66,000 cases in 1990 to approximately 182,000 cases in 2000. For a decade, the crime rate in Malaysia has increased about 165 per cent (on average 16.5 per cent a year). Furthermore, this criminal statistics continues to increase and created a new record in the Malaysia’s history with approximately 250,000 cases in 2008. In other words, International Journal of Social Economics Vol. 38 No. 1, 2011 pp. 50-69 q Emerald Group Publishing Limited 0306-8293 DOI 10.1108/03068291111091963
JEL classiﬁcation – C22, E31, K14, L83 The author would like to thank the anonymous referees. The author would also like to acknowledge Kevin Fernandez for proofreading the ﬁrst draft of this paper. The usual disclaimer applies.
almost 685 cases occurred per day or about 30 cases occurred per hour. No doubt, the crime ﬁgure in Malaysia is relatively low compared to the high crime rate economies; however, it has created Malaysian awareness to call for effective strategies to combat the critical criminal phenomenon. Therefore, it is of utmost important to establish an empirical study to examine the determinants of crime rate in Malaysia. We are aware of the fact that, investigation on the determinants for crime rate is not a fresh area of exploration; however, the surging trend of crime rate in Malaysia has sparked the interest of many researchers to investigate factors behind the increasing pattern to provide valuable information for policymakers to combat crime. For Malaysia,...