Mitigating the Vulnerability of the Tourism Industry to External Shocks: The Role of Remittances

The purpose of this study is to investigate the role that remittances play in enhancing the economic and social resilience of Nepal's tourism industry in the face of socioeconomic challenges. This research highlights how remittance inflows are a financial mechanism that sustains and stabilizes the tourism industry. Rather than viewing remittances and tourism income as complementary sources of revenue, this research focuses on how remittances serve as a source of revenue. The study investigates the short-term and long-term relationships between remittances and tourism income by employing time-series data from 1975 to 2023, applying the Autoregressive Distributed Lag (ARDL) model, and conducting Granger causality tests. According to the findings, remittances significantly contribute to the tourism industry by increasing households' disposable income, boosting the demand for domestic tourism, and opening up opportunities for infrastructure development. Furthermore, the Granger Causality test results indicate that remittances serve as a financial buffer, thereby mitigating the adverse effects of economic downturns and external shocks on the tourism industry. These findings highlight the importance of incorporating remittance flows into tourism development strategies to guarantee the sector's capacity for adaptation and sustainability during economic uncertainty.