Asymmetric relationship of environmental degradation and economic growth with tourism demand in Pakistan: evidence from non-linear ARDL and causality estimation

The purpose of this study is to assess the asymmetric associations of environmental degradation and economic growth with Pakistan’s tourism demand. To fulfil this purpose, “non-linear autoregressive distributed lag” (NARDL) modelling was performed on the time series data collected from Pakistan for 26 years. The unit root test, co-integration test, long-run estimation and NARDL estimations were applied to the data to generate findings. The present study revealed that there exist the significant asymmetric associations between environmental degradation and tourism demand. It has also indicated that there exist the significant asymmetric associations between economic growth and tourism demand. It is found through the non-linear ARDL estimation results that the increase or decrease in economic growth leads towards the increase of the tourism demand of Pakistan. It means that any change (either positive or negative) in economic growth is followed by the increase of the tourism demand. Results further indicate that the increase in environmental degradation in Pakistan causes its tourism demand to reduce while the negative change in the environmental degradation does not cause any significant effect on tourism demand. However, this relationship becomes significant in the long run as the negative change in environmental degradation caused significant inverse effect on tourism demand in long run. The current study tends to be theoretically significant and practically beneficial for Pakistan’s policymakers. It will help them realize the role of economic growth of the country and environmental degradation in shaping Pakistan’s tourism demand and thus help them develop and implement better policies for the growth of the tourism sector.