Inbound Versus Domestic Tourism Expenditure on National Income in Malaysia

Abstract

The study aims to evaluate whether inbound tourism and domestic tourism expenditure contributes to national income for a developing economy like Malaysia based on Tourism-Led Growth Hypothesis. The dependent variable is GDP; meanwhile, inbound tourism expenditure, domestic tourism expenditure, inflation and exchange rate are the independent variables. The ARDL method was employed on secondary time series data from 1994 to 2024, to determine whether there is a relationship between these independent variables with the dependent variables in the short term and long term. The result revealed that inbound was significantly negative in the short term and long term. Domestic tourism expenditure revealed a significantly positive relationship with GDP, both in the short term and long term. Similarly, inflation also exhibits a significantly positive relationship in the short term and long term. Contrary, the exchange rate revealed an insignificant relationship both in the short term and long term. Therefore, it can be concluded that there is a significant economic leakage from the inbound tourism. Thus, strategic measures need to be taken to enhance the value of the local supply chain to reduce economic leakages.