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Effect of tourism on economic growth of Sri Lanka: accounting for capital per worker, exchange rate and structural breaks

Peter Josef Stauvermann (), Ronald Kumar (), Syed Jawad Hussain Shahzad () and Nikeel Kumar ()
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Peter Josef Stauvermann: Changwon National University

Economic Change and Restructuring, 2018, vol. 51, issue 1, 49-68

Abstract: Abstract We explore the nexus between tourism, exchange rate and economic growth in Sri Lanka over the period 1980–2014. Using the augmented Solow (Q J Econ 70(1):65–94, 1956) framework and the ARDL bounds procedure whilst accounting for structural breaks using Bai and Perron (J Appl Econ 18(1):1–22, 2003) multiple break tests, the short-run and long-run association and impacts are examined. The results confirm the presence of a long-run association between tourism receipts (% of GDP), exchange rate, capital per worker and output per worker. The regression results show a 1% increase in tourism receipts results in a 0.03 and 0.06% increase in output per worker in the short-run and long-run, respectively. A unidirectional causality is noted from tourism to output per worker; from exchange rate to output per worker and capital per worker; and from output to capital, in per worker terms. Finally, we note that although structural breaks periods have negative association with economic growth, they are not statistically significant.

Keywords: Tourism; Economic growth; Elasticity; Cointegration; Causality; Structural breaks; Sri Lanka (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:kap:ecopln:v:51:y:2018:i:1:d:10.1007_s10644-016-9198-6