Causal Analysis of Tourism and Economic Growth in India and Sri Lanka

Abstract: The present study analyzes the existence and direction of causality between economic growth and tourism development. This study utilized two bivariate models- 1) Gross domestic product (at constant price) (GDPc,J and foreign tourist arrivals (FTAs); and 2) Gross domestic product (at current price) (GDP cJ and foreign exchange earnings (FEEs) during the period of 1991-2016 and 1980-2016 for India and Sri Lanka. For this objective, in-depth empirical results are provided by
using the approach of Phillips-Perron unit root tests, Johansen Cointegration tests and Granger Causality Wald tests. Results from these models indicate that variables (GDP cu and FEEs) return to their long run relationship with bidirectional causal link during 1991-2016 in Sri Lanka. However, in India, the FTAs and GDPcn have shared a long run relationship with unidirectional causal link in the same period. However, the results are also reported for the same dynamics between the variables (FTAs and GDPc,J where no causal relationship in India as well as Sri Lanka during 1980 to 2016 has been estimated.

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Authors: Manoj Kumar, Ritika