Iranian Tourism Demand for Malaysia: A Bound Test Approach

This paper investigate Iranian tourism demand to Malaysia using the recently developed autoregressive distributed lag (ARDL) ‘Bound test’ approach to cointegration for 2000:Q1 to 2013:Q4. The demand for tourism has been explained by macroeconomic variables, including income in Iran, tourism prices in Malaysia, tourism price substitute, travel cost and trade value between Iran and Malaysia. In addition, three dummy variables, namely September 11 terrorist attack in 2001, the outbreak of SARS in 2003 and increase exchange rate in 2011 are also included. The results show that a long-run relationship exists between variables. Iranian tourist arrivals to Malaysia are positively influenced by Lag dependent variable (word of mouth), tourism price adjusted by exchange rate, tourism price substitute and trade value. Iranian tourists seem to be highly sensitive to the price variable. Also, ever since the September 11 attack, Malaysia has become an oasis for tourists from the Middle East (Iran) as it is able to provide a safe haven for Muslim tourists as an alternative destination.