Long-Run Nexus of Tourism and Economic Growth in Sri Lanka: Empirical Evidence Using Cointegration Analysis

Kurukulasooriya, Nisantha; Lelwala, Erandathie

مجلة بحوث الإدارة والاقتصاد
Volume 3, Numéro 1, Pages 25-43
2021-03-16

Long-run Nexus Of Tourism And Economic Growth In Sri Lanka: Empirical Evidence Using Cointegration Analysis

Authors : Kurukulasooriya Nisantha . Lelwala Erandathie .

Abstract

This study investigates the relationship between economic growth and income from tourism in Sri Lanka using cointegration analysis for the period 1980 to 2019. Augmented Dickey-Fuller and Phillips – Perron unit root tests employed to determine the stationarity of time series and Engle-Granger cointegration test employed for data analysis. Engle-Granger cointegration test discovered a long-run equilibrium relationship though they may be in disequilibrium in the short-run. The estimated error correction term is theoretical acceptable and a 4 percent yearly correction of its disequilibrium in the short run relationship was found. Granger causality test presented a long-run unidirectional causality which is running from tourism to economic growth, while short-run causality between variables indicated. The findings of this study confirm the tourism-led growth hypothesis in Sri Lanka tourism and development and therefore tourism has a significant positive impact on the economic activities in the long run. Findings further emphasis that benefit of the economic development must be transferred to further development of the tourism to maintain a bilateral causality which is an important concept in this regard. It provides the rationale for further development of effective tourism strategies to increase visitor arrivals as well as visitor expenditures during their stay in Sri Lanka to benefit its economy to a greater extent. Therefore, as a part of the policy implications, it is necessary that all wings of the government, private bodies, and voluntary organizations should become active partners in this endeavor.