Severalattempts have been made to investigate the impact of tourism on economic growthis several countries. As a matter of fact, empirical evidence bears witnessthat tourism contributed to export-led economic growth. Dritsakis(2004), in his study on the economic growth performance of Greece, concludedthat tourism has an effect on economic growth in the long run. Furthermore,,Tosun (1999), Balaguer and Cantavella-Jorda (2002), Guduz and Hatemi (2005), Eugenio-Martinand Morales (2004) and Oh (2005) claimed the existence of tourism-led growth. Balaguerand Cantavella-Jorda (2002) conducted an analysis on tourism as a long-runeconomic growth factor.
The sample country used was Spain. The results indicatethat an increase in tourism income has an effect on economic growth. Furthermore,Dristakis (2004), while studying on tourism as a long-run economic growthfactor for Greece, concluded that there is a bi-directional relationshipbetween the 2 variables. Eugenio-Martinand Morales (2004) also conducted a study regarding the relationship betweentourism and economic growth. With their analysis based on a panel dataapproach, and using data for the years 1985 to 1998 for Latin Americancountries, they reached the conclusion that an increase in the number oftourists affects economic growth positively for countries with low and mediumlevels of income per capita.
Usingthe new heterogeneous panel cointegration technique, Lee and Chang (2008)conducted a study on tourism development and economic growth. They used asample of 32 countries, including both OECD and non-OECD countries. Theyreached the conclusion that there exists a unidirectional link flowing fromtourism towards growth for OECD countries. However, for non-OECD countries,they observed a bidirectional causality relationship.Brau,Lanza and Pigliaru (2003) used a sample of 143 countries in their studyattempting to determine how fast small tourist countries are growing.
As such,they selected 14 tourism countries out of the sample of 143. Using datastretching from the year 1980 to 2003, they found out that tourism countriesgrow faster than the other countries on the selected list. They further theirclaim by concluding that while being small does not help a country when itcomes to growth, combined to tourist specialization, the smallness of a countrycan be favorable. Sinclair (1998) adds to the claim by arguing that manydeveloping countries view tourism as a primordial part of their economicgrowth. Usingthe convergence approach, Proenca and Soukiazis (2005) conducted a study on theimpact of tourism on per capita income growth. Collecting data for differentregions of Portugal, they concluded that tourism can help in enhancing regionalgrowth in Portugal.
However, this will only hold if the supply side of thetourism sector is improved. In other words, if infrastructures are built toaccommodate for the tourists, they will be able to promote regional growth. Ivanovand Webster (2006) also conducted a study on measuring the impact of tourism oneconomic growth. The research used data for the years 1997 to 2004 for thecountries Cyprus, Greece and Spain. The results point out that tourism is amajor contributor to the GDP of Greece. However, the study also concluded thatthe tourism industry is decreasing the growth in Cyprus and Spain.
Oh(2005) conducted a study on the contribution of tourism development to economicgrowth in the Korean economy. The research uses Engle and Granger two-stageapproach and a bivariate Vector Autoregression (VAR) model. The study pointstowards a one-way causality for economic-driven tourism growth in the Koreaneconomy. Lookingat the other variables, Falki (2009) conducted a study on the impact ofinvestment, more precisely FDI, on economic growth. Selecting Pakistan’seconomic data for the period 1980 to 2006, a positive relationship between thetwo variables was noted.
Korneckiand Borodulin (2006) also conducted a study on the impact of investment oneconomic growth. Using U.S. data for the years 1981 to 2007, the resultspointed out that FDI has a significant influence on GDP growth in the U.S.
Astudy has been carried out to investigate the relationship between inflation, inflationuncertainty and economic growth in 94 emerging and developing countries byBaharumshah, Slesman and Wohar (2016). Using GMM estimator from 1976 to 2010,the results show that the effect of low inflation is from negative growtheffect of high inflation rates and the growth. While in non-inflation crisiscountries, the negative-level effect of not keeping inflation in check outweighthe positive effect from uncertainty. When inflation reaches moderate rangeswhich are 5.6 to 15.9%, it is confirmed that there is the existence of apositive effect of uncertainty about the inflation rate on growth through aprecautionary motive.Regardingexports and economic growth, Chow (1987) conducted a study on 8 countries forthe year 1960 to 1980.
Bidirectional causality was to be noted for Brazil,Hong-Kong, Israel, Korea, Taiwan and Singapore. On the other hand,unidirectional causality was noticed in Mexico, while no causality was foundfor Argentina. This was further agreed by Ram (1987), who conducted his studyfor 88 countries for the years 1960 to 1982. As a matter of fact, he found apositive correlation for more than 80 percent of the countries.