Tourism and Determinants of Economics Development – An ARDL Approach in Case of Pakistan

Abstract

Tourism is an important sector of the economy because it contributes to income generation, foreign-exchange earnings, investment, employment, and the development of related industries. This study examines the relationship between tourism and selected economic and institutional factors in Pakistan using annual time-series data covering the period from 1995 to 2025. The econometric result of ARDL Bound Test approach shows that in  short run 1% increase in GDP,  Foreign Direct Investment, Balance of Payment, and Political Stability, increase Tourism by (0.007), (0.034), (0.028), (0.140) respectively, while Unemployment decreases the tourism by -0.025 percent. Moreover, in long run 1% increase in Foreign Direct Investment, Balance of payment  and political stability increases the tourism by (0.036), (0.007), (0.213) percent respectively, while GDP and Unemployment decreases the tourism by (-0.026) and (-0.07) respectively. However, the outcomes reveal that foreign investment, political stability, and favourable balance of payments conditions are positively associated with tourism development in Pakistan, while unemployment has a negative association with tourism. The study recommends that the Government of Pakistan improve tourism facilities, strengthen political stability and security, facilitate international tourists, encourage tourism-related investment, and develop supportive economic policies. These measures can help increase tourism activity and enhance its contribution to economic development in Pakistan.

Keywords: Tourism, Political Stability, Unemployment, Heritage Tourism, Destination Marketing.