Abstract
This paper contributes to the tourism–growth literature by applying the new vector autoregressive-based Granger causality test in the presence of instability to reassess the Granger causality between Hong Kong’s tourism and economic growth. The results of the traditional and recursive Granger causality test under the VAR framework show that the tourism-led economic growth hypothesis (TLEGH) and the economy-driven tourism growth hypothesis (EDTGH) are both unstable in Hong Kong. The results of the vector autoregressive-based Granger causality test in the presence of instability generally support bidirectional causality between tourism and economic growth. However, the relationship between tourism and economic growth is vulnerable to sudden major political incidents, public health incidents, and financial crises. Among these incidents and crises, political events have long-term effects on the relationship between Hong Kong’s tourism and economic growth. In contrast, economic policies, financial crises, and public health emergencies have short-term impacts on the relationship.
Highlights
Tourism–Growth Nexus in the Tourism creates new employment opportunities, increases infrastructure investment, increases foreign exchange income, provides significant tax benefits, and reduces poverty for a country or region [1,2]
Some scholars later studied the stability of the causal relationship between tourism demand and economic growth and found that this causal relationship is changed by external shocks [27,40]
The recursive Granger causality tests are conducted by setting the initial sample size T, and a new observation is added to the end of the sample (i.e., N + 1)
Summary
Tourism–Growth Nexus in the Tourism creates new employment opportunities, increases infrastructure investment, increases foreign exchange income, provides significant tax benefits, and reduces poverty for a country or region [1,2]. Tourism contributes to generating investment flows and financial resources for local and central public administrations; it contributes to solving social issues by improving employment opportunities and the standard of living, as well as harmonizing the rate of local and regional growth [2,3]. Changes in tourism revenue and expenditure will have a certain impact on economic growth depending on the links between tourism and the economy [5]. There has been a proliferation of empirical studies testing the relationship between tourism and economic growth [6,7]. It is crucial to investigate the unstable causal relationship between tourism and economic development
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
