Tourism and economic growth: a time-varying parameter approach

Abstract

The main goal of this study is to investigate the effect of tourism on the economic growth in Turkey over the period of 1970–2011 using the time-varying parameter and the Kalman filter approaches. The results show that tourists have a positive impact on the economic growth of Turkey. We have found that a 1% increase in the spending of tourists leads to a 0.03% increase in the gross domestic product per capita. In addition, physical and human capital and government consumption expenditure have positive effects on economic growth, while real effective exchange rate has a negative effect on Turkey's economic growth. Finally, this study shows that the product elasticities are inelastic in Turkey during the period of 1970–2011.