The tourism sector in Malaysia: An analysis of the impact of economic growth, political instability and the exchange rate

Globally the tourism sector is one of the largest economic sectors and also one of the fastest growing sectors in the world. It is also one of the main economic sectors in attracting and generating foreign revenue, acting in a similar manner to an export industry and accounts for seven percent of global foreign revenue as an export industry. For this study, Malayisa was selected as the study region. In Malaysia, the sector plays an important role in the growth and development of the economy in support of traditional economic sectors. The objective of this study was to analyse the relationship of the dependent variable, namely the tourism sector, with economic growth, political stability and changes in the exchange rate, as independent variables. Malaysia is classified by the UN as an upper-middle income developing country. This study followed a quantitative research approach using an econometric model, with time series data from 1996 to 2017. The relationships between the variables were analysed using descriptive statistics, the Johansen cointegration model, the Vector Error Correction (VECM) and the Granger causality analysis. The results indicated that there are both long and short-run relationships between the variables. The tourism sector is significantly affected by the predicting variables and changes in these variables should be monitored and taken into account in policy formulation. A number of policy recommendations that could potentially contribute to the extension of the role of tourism in development include improved stability regarding politics and the local currency.