Relationship between international tourist and their length of stay towards share of gross domestic product of nepalese tourism: Vector error correction model approach

This study tries to examine long run causality of international tourist arrival in Nepal and their average length of stay towards share of gross domestic product of tourism by using vector error correction model (VECM). A multivariate time series analysis has been applied from the period of 1991 to 2014 tourism data of Nepal. The results of Johansen test of co-integration indicates there is one co-integrated vector under 4 lags of length among the share of gross domestic product of Nepalese tourism, international tourist, and their average length of stay. The long run relationship based on vector error correction model has indicated that coefficient of GDP elasticity with respect to average length of stay is more elastic as compared to coefficient of GDP elasticity with respect to number of international tourist arrival in Nepal. The results of Granger causality analysis have depicted that there exists bidirectional causal relationship between GDP and average length of stay of tourist. Similarly, unidirectional causal relationship exists between GDP and number of international tourist arrival in Nepal.