| Abstract: |
In this study, we investigate the impact of tourism on financial development
in Kenya using time series data from 1995 to 2017. The study uses the
autoregressive distributed lag (ARDL) bound testing approach to cointegration
and error correction model to examine this linkage. To increase the robustness
of the results, the study uses two proxies of financial development, namely
broad money (bank-based financial development proxy) and total value of stocks
traded (market-based financial development proxy). Results show that tourism
has an insignificant impact on financial development in Kenya ? both in the
short and in the long run. The results apply irrespective of whether the
financial development is proxied by a bank-based financial development
indicator or by a market-based financial development indicator. This finding
points to the fact that, although tourism is one of the main sources of
foreign exchange in Kenya, it has no direct impact on financial development.
The findings from this study add value to policy makers in Kenya by revealing
the insignificant impact tourism has on financial development, although it is
contrary to other studies that found a positive contribution. Based on the
findings, Kenya may not anchor its financial development policies on tourism. |