Abstract
ABSTRACT In this study, the dynamic Granger-causality between tourism development and economic growth in South Africa was empirically examined during the period 1995-2016. The study was motivated by the limelight that the South African tourism sector has been enjoying in recent years, on the one hand, and the lack of sufficient coverage of tourism-growth nexus studies in many sub-Saharan African countries, on the other hand. The study used two tourism proxies, namely tourist arrivals and tourism revenue, to examine this link. In addition, the study used exchange rate and foreign direct investment as intermittent variables in a multivariate Granger-causality model in order to address the omission-of-variable bias. Using the auto-regressive distributed lag (ARDL)-bounds testing approach, the study found that although the direction of causality between tourism development and economic growth in South Africa is sensitive to the proxy used and the time under consideration, in the main, a feedback relationship tends to predominate in the short run. The study, therefore, recommends that short-term policy efforts be directed at developing the tourism and the real sectors as both sectors have been found to reinforce each other in the short run, irrespective of the tourism proxy used.
Highlights
The relationship between tourism and economic growth has attracted a plethora of empirical literature in recent years
When the tourist arrivals variable is used as a proxy for tourism development, there is short-run bidirectional causality between tourism and economic growth in South Africa in the short run and a long-run unidirectional causality from economic growth to tourism development
When total tourism revenue and total tourism revenue as a percentage of GDP are used to measure tourism development, only short-run bidirectional causality between tourism and economic growth is found to prevail in South Africa
Summary
The relationship between tourism and economic growth has attracted a plethora of empirical literature in recent years. These include studies conducted by Dritsakis (2004), Durbarry (2004), Kim et al (2006), Khalil et al (2007), Lee and Chien (2008), Chen and Chiou-Wei (2009), Katircioglu (2009), Kadir and Jusoff (2010), Lean and Tang (2010), Corrie et al (2013), Tang (2013), Trang and Duc (2013), Wang and Xia (2013), Trang et al (2014), and Wu and Wu (2019), among others Despite these three strands of literature, which posit that there is a causal relationship between tourism and economic growth at least in one direction, there is a fourth view which argues that there is no relationship between tourism and economic growth, and that their perceived empirical relationship could merely be mechanical. Mishra et al, 2010 Katircioglu, 2010 Katircioglu, 2011 Tang, 2011 Deng et al, 2014 Tang and Abosedra, 2015 Shakouri et al, 2017 Nene and Taivan, 2017 Wu and Wu, 2019
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