Title Page
ABSTRACT
Contents
LIST OF ABBREVIATIONS 13
I. INTRODUCTION 14
1. Background of the Study 14
2. Purpose of The Study and Its Importance 16
3. Research Methodology 16
4. Data Collection and Limitation of The Study 17
5. The Structure of The Study 18
II. LITERATURE REVIEW 19
1. GDP & economic growth 19
A. Factors that influence economic growth 19
B. The underlying phenomenon between tourism and GDP 20
2. Relationship between Tourism Development and Economic Growth 21
A. Tourism led to economic growth 21
B. The economic-driven tourism growth 24
C. Reciprocal relationship 25
D. Neutral relationship 26
III. TOURISM SECTOR IN SAUDI ARABIA 28
1. General Overview 28
2. Tourism Sector 29
A. Tourism Definitions and Service Quality 29
B. Tourism Industry Classifications 31
C. Factors that influence the demand and supply of tourism 34
3. Tourism Impacts 36
IV. SAUDI ECONOMY OVERVIEW 41
1. General Economic Outlook 41
A. Development Period Before and after 1970 41
B. The First Phase (1970-1981) 'Boom Phase' 42
C. The Second Phase (1982-2002) 'Recession Phase' 46
D. The Third Phase (2003-2014) 'Recovery Phase' 49
2. Saudi Stock Market Overview 52
A. Stage one: The Early Stage (1935-1984) 52
B. Stage two: Establishment (1985-2003) 52
C. Stage three: current stage (from 2004 to the present) 52
3. TRADE IN SERVICES 53
V. Statistical Models and Empirical Analysis 55
1. Theoretical Background 55
A. Tourism Receipts and Economic Growth 55
B. Tourist Arrivals and Economic Growth 55
C. Tourism and Exchange Rates 55
2. Preliminary Data Analysis 56
A. Data Explanation 56
B. Unit Root Tests 58
C. Lag Length Selection and Granger Causality Test 60
D. Johansen Cointegration Test 63
3. The Model 65
A. Specifications of The Model 65
B. VAR Model 66
C. VAR-ECM Model 70
D. Impulse responses and Variance decomposition 75
VI. CONCLUSION AND RECOMMENDATIONS 81
REFERENCES 84
Table V.1. Summary statistics 57
Table V.2. Unit Root Tests 59
Table V.3. Lag Length Selection 60
Table V.4. Granger Causality Test 62
Table V.5. Johansen's Test for the Number of Cointegration Vectors 65
Table V.6. Estimation Results of Conventional VAR for DLGDP, DLINTR, DLTR, DLEXR 70
Table V.7. Estimation Results of VECM 74
Table V.8. Estimated Variance Decomposition for VAR (DLGDP, DLINTR, DLTR, DLEXR) 78
Table V.9. Estimated Variance Decomposition for VAR-ECM (LGDP, LINTR, LTR, LEXR) 79
Figure III.1. Percentage of foreign religious and non-religious visitors in Saudi Arabia 29
Figure III.2. Number of visits to the most attractive rural places in Saudi Arabia in 2018 33
Figure III.3. Saudi Tourism sector Saudi Arabia Sector Characteristics in 2019 34
Figure III.4. Illustrate the monthly seasonality of religious tourism in Saudi in 2014 35
Figure III.5. Total contribution of travel and tourism to employment in Saudi 37
Figure III.6. Number of people employed in the tourism sector in Saudi Arabia in 2019 38
Figure III.7. Saudi Tourism sector contribution to real GDP (USD Billion) 38
Figure III.8. Summary of Travel and Tourism Economic Contribution 40
Figure IV.1. Average Annual Oil Prices, Economic and Political Events 42
Figure IV.2. GDP Growth rate at constant prices during the first stage 1970-1981 43
Figure IV.3. Gross domestic product during the first stage 1970-1981 43
Figure IV.4. Saudi Crude Oil Production During the First Stage 1970-1981 44
Figure IV.5. Oil Revenues During the First Stage 1970-1981 44
Figure IV.6. Annual Current and Capital Government Spending: 1970-1981 45
Figure IV.7. Average Income Per Capita During the First Stage 1970-1981 45
Figure IV.8. GDP Growth Rate at Constant Prices During the Second Stage 1982-2002 46
Figure IV.9. Gross Domestic Product During the Second Stage 1982-2002 46
Figure IV.10. Saudi Crude Oil Production During the Second Stage 1982-2002 47
Figure IV.11. Oil Revenues During the Second Stage 1982-2002 47
Figure IV.12. Annual Current and Capital Government Spending: 1982-2002 48
Figure IV.13. Average Income Per Capita During the Second Stage 1982-2002 48
Figure IV.14. GDP Growth Rate at Constant Prices During the Third Stage 2003-2014 49
Figure IV.15. Gross Domestic Product During the Third Stage 2003-2014 49
Figure IV.16. Saudi Crude Oil Production During the Third Stage 2003-2014 50
Figure IV.17. Oil Revenues During the Third Stage 2003-2014 50
Figure IV.18. Annual Current and Capital Government Spending: 2003-2014 51
Figure IV.19. Average Income Per Capita During the Third Stage 2003-2014 51
Figure IV.20. Capital Investment in Travel and Tourism US$ (billions) 53
Figure IV.21. Inbound tourism expenditure as a share of exports of services in Saudi 53
Figure IV.22. Saudi Arabia's Trade in Services, 2011-2019 54
Figure V.1. Line graph representing GDP and the independent variables 56
Figure V.2. AR Roots Graphs 61
Figure V.3. Influence Function for VAR 76
Figure V.4. Influence Function for VAR-ECM 76