Another look at tourism-economic development nexus

Abstract

This paper investigates the causal relationships between tourism and economic development in emerging market economies. By using annual data for the period of 1995-2014, this study applies Granger causality analysis across countries to find the causal relationships between international tourism receipts (% GDP) and economic growth (annual %). Impulse responses function is also employed to track the responsiveness of one variable to shocks to another variable. Our estimation results generate evidence for uni-directional causality from tourism to economic growth in Brazil, Mexico and Philippines while reverse relationship is detected for China, India, Indonesia, Malaysia and Peru. No causality is obtained for seven out of sixteen emerging market countries, and finally, bidirectional causality is detected for Chile. The impulse responses analysis confirms causality test results by detecting the linkage between economic growth and tourism receipts. Discussion, policy implications, and further research suggestions are provided in the article.