An Examination of the Causal Relationship Between Tourism and Economic Growth in Ghana from 1987 to 2018

Faustina Erica Fredua ,Li Yuejun ,Shen Hongcheng

doi:10.7176/jesd/11-20-04

Abstract

The growth of every nation is its ability to improve every sector of the economy that provides better outcomes through revenue mobilization and investment. With the Ghana’s attention shifted to tourism, it is imperative to identify how tourism could trigger growth in the country. Thus, the study sought to examine the causal relationship between tourism and economic growth of Ghana and its related challenges. The study adopted a mixed method approach in the collection and analysis of data. Both secondary and primary data were used in the analysis of the study. In analyzing the quantitative study, data on tourism and GDP from 1987 to 2018 were used. The study adopted the Johansen Cointegration test and the instrumental variable estimation to identify the causal relationship among the variables. The outcome of the study from the Johansen and Co-integration test instrumental variable showed that there is a unidirectional causal relationship between tourism receipt and GDP growth both in the short run and the long run and a positive significant effect of tourism on economic growth of Ghana. The result showed that government has been the major contributor to the sector. Also, the most challenging issue curtailing the sector was found to be the issue of the COVID 19 pandemic. As such, the study recommended that ensuring public-private partnership could improve the sector to ensure growth in the economy. Further extensive research is required to understand the effects of tourism on host communities. Keywords: Tourism, Gross Domestic Product (GDP), Economic Growth, Ghana, Tourism industry, Climate Change. DOI: 10.7176/JESD/11-20-04 Publication date: October 31 st 2020

Highlights

The agenda for most countries is to achieve growth through the reduction in the Balance of Payment Deficit, creation of jobs and promoting fiscal discipline
1.2 Objectives of the Study the study seeks to examine the long-run causal effects of tourism on economic, investigate the role of government and non-governmental organizations in the tourism industry, identify the challenges faced by the tourism industry and examine the mechanisms adopted to promote the sustainability of the tourism industry in Ghana
1.3 Hypothesis H : There is no causal effect of tourism on the economic growth of Ghana H : There is a causal effect of tourism on the economic growth of Ghana

Summary

Introduction

The agenda for most countries is to achieve growth through the reduction in the Balance of Payment Deficit, creation of jobs and promoting fiscal discipline. In finding solution to the aforementioned, tourism has gained the root in most African countries, serving as a revenue generation to countries in sub-region (WTTC, 2019).Due to its relevant nature, most governments have come to the realization that this sector does increase the foreign exchange earnings, and serves as an avenue for job creation and stimulation of growth in the economy (Samini, Sadeghi & Sadeghi 2011). The country is seen to be endowed with natural, cultural and other man-made attractions. The rich culture of the country with over 30 festivals celebrated by different ethnic groups at different calendar of the year, with over 30 fortes and castles across the country, handicraft, local cuisines and music, all promote the tourism in the country (Sampson 2016)

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