Abstract
This article provides new global evidence for the causal relationship between international tourist arrivals (TA) and economic growth (EG). The analysis considers 23 developing and developed countries and covers the period from January 1981 to December 2017. The causal relationship between TA and EG is determined using a bootstrap mixed-frequency Granger causality approach adopting a rolling window technique to evaluate its stability and persistency over time. Empirical results show that causality is time-varying in both the short-term and the long-term. We illustrate our results by constructing a new global connectivity index (GCI). The GCI shows that international TA remain a leading indicator for future EG in a global perspective, especially during the global financial crisis (GFC). Our findings suggest that tourism sector plays an important part in the future EG in developing countries after the GFC. Similarly, the period after the GFC is characterised by one of the highest values of the tourism-led EG in developed countries according to the GCI; however, this effect is temporal and quickly eradicates. Overall, we find that tourism sector in developing countries remains a primary contributor to future EG, which is not the case in developed countries.
Highlights
Tourism is one of the most visible and fastest growing facets of globalisation that has undergone remarkable growth over the last 50 years (Scott et al, 2019)
We empirically investigate whether the tourism sector, represented by international tourist arrivals (TA), can be a leading indicator for future economic growth (EG) across 23 developing and developed nations, whether the stage of country development matters in this relationship, and by using time-varying models, to identify the periods ofconnect between tourism and EG
We investigate the relationship between monthly TA (TA) and quarterly real GDP growth (EG) by using the mixed-frequency VAR (MF-VAR) approach proposed by Ghysels et al (2016). t E f1; 2; . . . ; T Lg is a time sequence at quarterly frequency.TAðt; jÞ denotes the series of TA at the jth month of quarter t, where jEf1; 2; 3g
Summary
Tourism is one of the most visible and fastest growing facets of globalisation that has undergone remarkable growth over the last 50 years (Scott et al, 2019). With strong growth projections in international TA, the WTTC positions tourism as an important contributor to the United Nation’s Sustainable Development Goals with forecasting the tourism sector to contribute 100 million new jobs globally over the 10 years (UNWTO, 2019) In this context, we empirically investigate whether the tourism sector, represented by international TA, can be a leading indicator for future EG across 23 developing and developed nations, whether the stage of country development matters in this relationship, and by using time-varying models, to identify the periods of (dis)connect between tourism and EG. Further evidence that economic influences of tourism vary across countries is provided by Zhang and Jensen (2007) who argue that international tourists are attracted by natural endowments and/or cultural heritage in tourism destinations This can be seen as comparative advantage of these destinations relative to the rest of the world along the lines of Heckscher–Ohlin model (Morley et al, 2014).
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