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Abstract
This study uses quarterly data from Malaysia (2000–2011) to examine the relationship between the wealth effect from real estate (WERE) and outbound tourism while controlling for other relevant outbound tourism determinants. By applying time-series cointegration regressions, the results show that WERE has a positive and significant impact on Malaysian outbound travel demand. Then, we exclude the departures for business purposes from the total departures in order to have a better understanding of the impact of WERE on the consumption of a luxury good like international travel for leisure purposes. Similarly, we find that WERE increases Malaysian international travels for leisure purposes. The findings provide some implications for Malaysian policy-makers as well as tourism and travel agents.
Notes
1. The total wealth can be thought of as the sum of human wealth, financial wealth and housing wealth (Kishor, Citation2007). According to Case et al. (Citation2005), wealth effect is the causal effect of exogenous changes in wealth upon consumption behaviour. More specifically, rise in consumption due to the increase in house prices is called housing wealth effect, whereas the rise in consumption that is due to the increase in stock market prices is called stock market wealth effect (Peltonen et al., Citation2012). Campbell and Cocco (Citation2007) argued that rising house prices may stimulate consumption by increasing households' perceived wealth or by relaxing borrowing constraints.
2. See, for example, http://www.iproperty.com.my, http://www.propwall.my, http://www.propertyguru.com.my and http://www.mudah.my.
3. After Singapore, Thailand and Indonesia are the main destinations for Malaysian tourists.
4. Endogeneity means that explanatory variables are correlated with the error term, either because of an omitted variables, measurement error or simultaneity (Wooldridge, Citation2009).
5. Two other efficient estimation methods of cointegrating regression are Canonical cointegrating regression and dynamic OLS.