Page 56 - 2022 Abstract Book RUICHSS_2022_11_17 after conference

University of Ruhuna ISSN: 2706-0063
Matara, Sri Lanka

Tourism and Economic Growth Link-Focus on Asia Pacific
Countries

Uvinya Ilukpotha, Ashinsana Jayathilaka, Chamath Tittagalla, Chathuni Wijesekara*,
Ruwan Jayathilaka and Punmadara Jayasinghe
SLIIT Business School, Sri Lanka Institute of Information Technology.
chathuni456@gmail.com

Economic growth and tourism development is interrelated. Hence an improvement in the
overall economy will help tourism development to investigate the connections between the
tourism and other elements such as macroeconomics and economic growth. This study
empirically examines the link between tourism and economic growth using the Panel Data.
The Unit Root Test, Cointegration Test and a Granger Causality Test were used to find out
the direction of the relationship for each country in the Asia and Pacific Region. Using annual
data from 2003 to 2020, this research examines 25 countries in the Asia and Pacific region.
By conducting the Cointegration test it was proven that a long-term relationship exists
between Per-Capita Gross Domestic Product and International Tourism Receipts. The
Granger Causality test provides evidence of a bidirectional causal relationship between
tourism and economic growth throughout the region. These results mainly indicate that an
increase in International Tourism Receipts could increase economic growth in most of the
countries in Asia and the Pacific region and vice versa. International tourist receipts were used
to approximate the demand for tourism while Per-Capita Gross Domestic Product was used
to quantify the economic growth. However, when causality was examined for the individual
countries, only two of the twenty-five showed a bidirectional relationship, while four showed
a unidirectional relationship. At the 1% significance level, a Granger causal link between Per-
Capita Gross Domestic Product and International Tourism Receipts was discovered. This
means that tourism leads to economic growth and vice versa in the in the Asia and the Pacific
region as a whole.

Keywords: Economic Growth, Granger Causality Test, Gross Capital Formation, Trade
Openness, Tourism Demand

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