BINUS Research on How Real Oil Prices and Domestic Financial Instabilities are Good for GCC Countries Tourism Demand in Malaysia

Malaysia, located in the heart of Southeast Asia, is a multicultural country whose ‘green’ and ‘blue’ tourism attractions have become the main tourism spot for the Cooperation Council for the Arab States of the Gulf (GCC) tourists. We employed the Threshold Error Correction (TECM) cointegration and the nonlinear causality estimates to capture the nexus between real energy prices and financial stability for the GCC countries’ tourism demand in Malaysia using the monthly-based dataset covering the period since 1995 until 2017.

The main TECM estimate shows that real energy price fluctuations and financial instability condition in Malaysia positively boost tourists’ arrivals from the GCC countries to Malaysia. Indeed, there is evidence of an asymmetric speed of adjustment of the GCC countries’ tourism demand with 25.9% and 36.7% of positive and negative deviations, respectively. In addition, this study found strong evidence of unidirectional nonlinear causal relations running from real energy prices to tourism demands; and also bidirectional causalities running from tourism demand to financial stability. These findings will be helpful for tourism policymakers in Malaysia while drawing a future roadmap to increase the numbers of the GCC tourists’ arrivals in future years.

Prof. Dr Tirta N. Mursitama, PhD from International Relations Bina Nusantara University has his article published in Journal of Scientific Papers ECONOMICS & SOCIOLOGY, a Scopus-indexed journal in 2018.