Tourism is an industry which can contribute to the
high revenue of a country. Medical tourism is the sub-set of tourism industry
which now act as a potential contributor in economic sector. Both has the
ability to improve the economic growth of a nation and even can cause a decline
too. Generally, when there is decline in tourism industry, it will cause a slow
down in economic growth. But will this theory also applies to the medical
tourism industry?

In a study by Tang (2015), he studies the
implication of medical tourism toward economic growth in Malaysia. The studies
found out that medical tourism and economic growth are cointegrated. Therefore,
both have long-run relationship and the result gained by medical tourism is
slightly higher than other variable. So, it proven that medical tourism is an
effective catalyst of growth which can help Malaysia gain the status of
developed country.

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Moreover, there are still lack of past researcher
who had done this research by using econometric methodology except for Tang. He
used Vector Error Correction model 
(VECM) to measure the long run relationship and Variance Decomposition
method to find out which variables are the most exogenous. So, a study on this
line of research should be done so that we can explain the result in economic
ways suitable with this course.

Other than that, the gap that could be found between
the past researcher and this study is the year of research. This study will
measure data until the latest year which is 2016 and will be using annually
data apart from quarterly data that has been used by Tang (2015). So, through
this time series we would like to study whether there will be any different in
the result that will be getting.

Plus, this study will measure the factors in  medical tourism affecting economic growth
which will be a more detail study than other studies. This is because most past
research basically studies the medical tourism itself such as (Tang, 2015) and
(Chee, 2010) where both uses medical tourism’s data from Malaysia, Singapore
and Thailand to explains their studies.

            Tourism-led growth is the theory
that will be used in this study. It studies either tourism causes economic
growth or economic growth causes tourism. Tang (2015) found out that tourism
has led to the increase of economic growth in Malaysia. Kartircioglu (2009)
find out that tourism can lead to the growth of economy and has support this
theory while Oh (2015) find out otherwise where economic growth lead to tourism
growth. This result might be different due to the time series uses, different
data and country of studies. So, in this study, we would like to find out the
relationship between tourism and economic growth especially the impacts by
medical tourism.

Lastly, we would like to see at the end of this
study are the relationship between medical tourism and economic growth, whether
both have long-run or short-run relationship and does the TLGH is suitable in
this case study.

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