Purpose:The purpose of this research paper is to empirically analyse the effects of tourism on economic growth in Western Balkan countries (Albania, Bosnia and Herzegovina, Croatia, FYROM, Montenegro and Serbia). Design/Methodology/Approach: The empirical analysis consists of 17-year panel data of 6 countries over the period 1998 to 2014. Several models are analysed using the panel regression econometric techniques. The study investigates the random and fixed effects, as well as individual heterogeneity across those countries. Also, the Hausman Taylor IV estimator is used as the most appropriate model for this analysis. The real income per capita of the sample countries is modelled as dependent on the lagged income per capita, tourist arrivals, tourism receipts, FDI stock, exports and government expenditures.
Findings:The estimation results in all types of models, and indicate that tourism has a positive and significant impact on economic growth in the Western Balkan countries. The Hausman Taylor IV model suggests that for every 1% increase of tourist arrivals, the output will increase approximately by 0.08%.
Research limitations/implicationsAlthough the Hausman Taylor IV model performs well, the results should be interpreted with caution. The analysis has its limitations; firstly, the total number of observations is relatively small for a panel regression analysis; secondly, the problem of endogenity is not completely avoided. However, the study implies that these countries should enhance efforts for joint tourism sector policies to engender economic sustainability. Originality/Value: -To our best knowledge, this is the first attempt of estimating the effects of tourism on economic growth in the Western Balkan countries using the Hausman Taylor IV model
JEL ClassificationsF43, Z32, C33
Fixed or floating exchange rate regime is one of dilemmas that arise between economic scholars and policymakers. Republic of Macedonia as a small opened economy has adopted the fixed exchange regime, but there are studies' conclusions that the country pays considerable costs in maintaining the fixed exchange regime. Therefore the purpose of this research paper is to answer the question by an empirical analysis if Macedonia needs to maintain the fixed exchange regime or should change the regime to floating. To examine this, we analyze the effects of a range of macroeconomic variables such as real GDP, government fiscal balance, retail price index, trade openness, current account balance and monetary aggregates on the real effective exchange rate. In order to allow interaction between above variables a co-integration test has been done for ascertaining the short and long run relationship. Also the Granger Causality test has been applied to determine if causal relationship exists between variables. Based on vector error correction method (VECM) results, real GDP, trade openness, current account and monetary aggregates do not have significant effect on the real effective exchange rate in the long run. Regarding the retail price index and government balance are significant determinants in the short as well as long run dynamics. Thus, the empirical results reveal some relevant arguments that support the fix exchange regime.
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