The Role of Foreign Tourists in Economic Growth: Evidence from Indonesia

Muhammad Azizurrohman, Romi Bhakti Hartarto, Yih-Ming Lin, Faiza Husnayeni Nahar

Abstract


Foreign tourism is indicated as one of the important instruments to encourage economic growth in several countries, including Indonesia. However, some studies only focus on the influence of tourist arrivals. Thus, the main objective of this study is to take a deeper look at the contribution of foreign tourism indicators to economic growth in Indonesia. Using panel data analysis from 33 countries between 2006 and 2016, this study applies three models: Pooled Least Square (PLS), Fixed Effect Model (FEM), and Random Effect Model (FEM). Based on the fixed-effect model, this study reveals that foreign tourist arrivals have a significant and positive effect on economic growth. However, other tourism indicators such as length of stay and expenditure of foreign tourists appear to have no contribution to economic growth. From these findings, it can be implied that the Indonesian government should not only attract more tourists to come but also design strategies to encourage tourists to spend more money and stay longer. This study also finds that depreciation of Indonesian currency and visa-free policies have a significant contribution to higher economic growth.


Keywords


Tourist Arrival; Economic Growth; Visa-Free; Exchange Rate

Full Text:

PDF

References


Adha, M., Nahar, F., & Azizurrohman, M. (2018). The impact of trade liberalization on poverty reduction in Indonesia. Jurnal Ekonomi & Studi Pembangunan, 19(2), 178-185. https://doi.org/10.18196/jesp.19.2.5009

Akan, Y., Işık, C., & Arslan, I. (2007). The impact of tourism on economic growth: the case of Turkey. Journal of Tourism, 9, 1-24.

Akin Aksu, A., & Aktaş, A. (2005). Job satisfaction of managers in tourism. Managerial Auditing Journal, 20(5), 479–488. https://doi.org/10.1108/02686900510598830

Al-Hallaq, S. S., Athamneh, A. B., & Suleiman, H. M. (2019). The impact of foreign direct investment on the growth of the tourism sector in Jordan (1980–2016). Journal of Public Affairs, 20(2). https://doi.org/10.1002/pa.2005

Burlig, F., Preonas, L., & Woerman, M. (2020). Panel data and experimental design. Journal of Development Economics, 144, 102458. https://doi.org/10.1016/j.jdeveco.2020.102458

Cheng, K. M. (2012). Tourism demand in Hong Kong: income, prices, and visa restrictions. Current Issues in Tourism, 15(3), 167–181. https://doi.org/10.1080/13683500.2011.569011

Chiu, Y.-B., & Yeh, L.-T. (2016). The threshold effects of the tourism-led growth hypothesis: evidence from a cross-sectional model. Journal of Travel Research, 56(5), 625–637. https://doi.org/10.1177/0047287516650938

Czaika, M., & Neumayer, E. (2017). Visa restrictions and economic globalisation. Applied Geography, 84, 75–82. https://doi.org/10.1016/j.apgeog.2017.04.011

Fadhila, R. S., & Rahmini, N. (2019). Pengaruh jumlah kunjungan wisatawan, tingkat hunian hotel, lama menginap wisatawan terhadap pertumbuhan ekonomi provinsi Kalimantan Selatan. JIEP: Jurnal Ilmu Ekonomi dan Pembangunan, 2(1), 21–32. Retrieved from https://ppjp.ulm.ac.id/journals/index.php/jiep/article/view/1152

Fayissa, B., Nsiah, C., & Tadasse, B. (2008). Impact of tourism on economic growth and development in Africa. Tourism Economics, 14(4), 807–818. https://doi.org/10.5367/000000008786440229

Figini, P., & Vici, L. (2010). Tourism and growth in a cross section of countries. Tourism Economics, 16(4), 789–805. https://doi.org/10.5367/te.2010.0009

Figini, P., Sahli, M., & Vici, L. (2018). Advances in tourism economics: The sixth IATE (International Association for Tourism Economics) Conference. Tourism Economics, 24(8), 911–914. https://doi.org/10.1177/1354816618811426

García-Sánchez, A., Fernández-Rubio, E., & Collado, M. D. (2013). Daily expenses of foreign tourists, length of stay and activities: evidence from Spain. Tourism Economics, 19(3), 613–630. https://doi.org/10.5367/te.2013.0218

Gaspar, J. M. (2020). Paul Krugman: contributions to geography and trade. Letters in Spatial and Resource Sciences, 13(1), 99–115. https://doi.org/10.1007/s12076-020-00247-0

Jena, S. K., & Dash, A. K. (2020). Does exchange rate volatility affect tourist arrival in India: a quantile regression approach. Regional and Sectoral Economic Studies, 20(2), 65-84. Retrieved from https://www.usc.es/economet/reviews/eers2025.pdf

Kuzey, C., Karaman, A. S., & Akman, E. (2019). Elucidating the impact of visa regimes: A decision tree analysis. Tourism Management Perspectives, 29, 148–156. https://doi.org/10.1016/j.tmp.2018.11.008

Lee, C.-C., & Chang, C.-P. (2008). Tourism development and economic growth: A closer look at panels. Tourism Management, 29(1), 180–192. https://doi.org/10.1016/j.tourman.2007.02.013

Li, S., & Song, H. (2013). Economic impacts of visa restrictions on tourism: a case of two events in China. Annals of Tourism Research, 43, 251–271. https://doi.org/10.1016/j.annals.2013.07.007

Mariyono, J. (2017). Determinants of demand for foreign tourism in Indonesia. Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi dan Pembangunan, 18(1), 82–92. https://doi.org/10.23917/jep.v18i1.2042

Neiman, B., & Swagel, P. (2009). The impact of post-9/11 visa policies on travel to the United States. Journal of International Economics, 78(1), 86–99. https://doi.org/10.1016/j.jinteco.2009.01.014

Oh, C.-O. (2005). The contribution of tourism development to economic growth in the Korean economy. Tourism Management, 26(1), 39–44. https://doi.org/10.1016/j.tourman.2003.09.014

Ollivaud, P., & Haxton, P. (2019). Making the most of tourism in Indonesia to promote sustainable regional development. OECD Economics Department Working Papers, No. 1535. OECD Publishing, Paris. https://doi.org/10.1787/c73325d9-en

Pompili, T., Pisati, M., & Lorenzini, E. (2019). Determinants of international tourist choices in Italian provinces: A joint demand–supply approach with spatial effects. Papers in Regional Science, 98(6), 2251–2273. https://doi.org/10.1111/pirs.12467

Sakyi, D., & Egyir, J. (2017). Effects of trade and FDI on economic growth in Africa: an empirical investigation. Transnational Corporations Review, 9(2), 66–87. https://doi.org/10.1080/19186444.2017.1326717

Samimi, A. J., Sadeghi, S., & Sadeghi, S. (2013). The relationship between foreign direct investment and tourism development: Evidence from developing countries. Institutions and Economies, 5(2), 59-68.

Samirkaş, M., & Samirkaş, M. C. (2016). The impact of exchange rate on tourism industry. International Business, 1165–1176. https://doi.org/10.4018/978-1-4666-9814-7.ch054

Savaş B, Beşkaya A, Şamiloğlu F (2010) Analyzing the impact of international tourism on economic growth in Turkey. International Journal of Management, Economics and Business, 6(12), 121–136. Retrieved from https://dergipark.org.tr/en/pub/ijmeb/issue/54588/744121

Schnabl, G. (2008). Exchange rate volatility and growth in small open economies at the EMU periphery. Economic Systems, 32(1), 70–91. https://doi.org/10.1016/j.ecosys.2007.06.006

Schneider, S. S. (1993). Advantages and disadvantages of tourism to an agricultural community. Economic Development Review, 11(4), 76-78.

Sinclair, M. T. (1998). Tourism and economic development: A survey. Journal of Development Studies, 34(5), 1–51. https://doi.org/10.1080/00220389808422535

Soukiazis, E., & Proença, S. (2007). Tourism as an alternative source of regional growth in Portugal: a panel data analysis at NUTS II and III levels. Portuguese Economic Journal, 7(1), 43–61. https://doi.org/10.1007/s10258-007-0022-0

Statistics Indonesia. (2018). Proportion of tourism contribution to GDP (percent), 2015-2017. Retrieved from https://www.bps.go.id/indicator/16/1188/1/proporsi-kontribusi-pariwisata-terhadap-pdb.html

Statistics Indonesia. (2020). Total foreign exchange of tourism sector (billion us $), 2016-2018. Retrieved from https://www.bps.go.id/indicator/16/1160/1/total-foreign-exchange-of-tourism-sector.html

Sulasmiyati, S. (2019). Analyzing inflation influence toward the number of foreign tourists visiting Indonesia and their impact on Indonesia’s economic growth. Media Bina Ilmiah, 14(3), 2181. https://doi.org/10.33758/mbi.v14i3.321

Uguz, S. C. (2017). Role of tourism on foreign exchange of developing countries and case of Turkey. Pressacademia, 4(1), 59–66. https://doi.org/10.17261/pressacademia.2017.379




DOI: https://doi.org/10.18196/jesp.v22i2.11591

Refbacks

  • There are currently no refbacks.


Copyright (c) 2021 Muhammad Azizurrohman, Romi Bhakti Hartarto, Yih-Ming Lin, Faiza Husnayeni Nahar

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

 

Office:
Redaksi JESP UMY, Gedung E2 Lantai 2, Fakultas Ekonomi dan Bisnis, Universitas Muhammadiyah Yogyakarta
Jalan Brawijaya, Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta 55183
Telp: (0274) 387656 ext.184
Fax: (0274) 387646
Email: jesp@umy.ac.id


Jurnal Ekonomi & Studi Pembangunan (JESP) is licensed under Creative Commons Attribution-ShareAlike 4.0 International.