Terrorism and Tourism in Pakistan

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Economic Modelling 33 (2013) 65–70

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Economic Modelling
journal homepage: www.elsevier.com/locate/ecmod

Terrorism and tourism: A conjunction and ramification in Pakistan Syed Ali Raza ⁎, Syed Tehseen Jawaid 1
IQRA University, Karachi-75300, Pakistan

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a b s t r a c t
This study investigates the impact of terrorism activities on tourism in Pakistan by using the annual time series data from the period of 1980 to 2010. Johansen and Jeuuselius and ARDL bound testing cointegration approach confirms the valid long run relationship between terrorism and tourism. Results indicate the significant negative impact of terrorism on tourism in the long run as well as in the short run. Results of rolling window estimation method indicate that terrorism having negative coefficients throughout the sample period. Results of dynamic ordinary least square (DOLS) suggest that the results will remain the same in the future up to lead 2. Results of Granger causality test, Toda and Yamamoto Modified Wald causality test and variance decomposition test confirm the unidirectional causal relationship between terrorism and tourism, causality runs from terrorism to tourism. Hye and Khan (2012) confirm tourism led growth hypothesis for Pakistan. It is suggested that the government should play a significant role to reduce terrorism activities that should be decreased in the country to boost tourism activities that lead to increase in income from tourism in Pakistan. © 2013 Elsevier B.V. All rights reserved.

Article history: Accepted 19 March 2013 Available online xxxx JEL classification: L83 C32 Keywords: Tourism Time series analysis Terrorism Cointegration

1. Introduction Many studies have been conducted on tourism activities. Some of them show the relationship between tourism activities with economic growth and found significant positive relationship between tourism and economic growth. 2On the other hand, some studies are done on the relationship between terrorism and tourism activities and conclude the negative and significant effect of terrorism on tourism activities. 3 In Pakistan, during last three decades, the average tourism activities have significantly increased. In the 1980's, the average tourism receipt was 41 million, in the 1990's it was 45 million and in the last decade the average tourism receipt was 196 million. In contrast, terrorist activities have also increased in last three decades. In the 1980's, the average terrorist activities was 27, in the 1990's it was 163 and in the last decade it was 251. Fig. 1.1 shows the trend in terrorism and tourist activities. Both activities show a mix trend but in the last few years, the terrorist activities have drastically increased in the country. The question is that, are terrorist activities correlated with tourism in Pakistan? This study examines this question by using long time series data from 1981 to 2010.

The rest of the paper is organized as follows: following the introduction Section 2 reviews some selected studies, Section 3 discusses empirical strategy, Section 4 shows estimations and results, Section 5 shows results of rolling window estimation, Section 6 discusses the results of dynamic ordinary least square, Section 7 shows the results of causal relationship between tourism and terrorism and the final section concludes the study and provides some policy implications.

2. Review of literature Most of the empirical research suggests that terrorism has significant negative effect on tourism activities. Some selected studies are reviewed below. Cook and McCleary (1983) and D'Amore and Anuza (1986) argue that previous international experience of tourists also influences their reaction to terrorism. In contrast, Sonmez and Graefe (1998) suggest the indirect impact of past international experience on future behavior. The nature of previous travel also has impact on future travel behavior (Mazursky, 1989)....
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