Tourism and economic growth revisited: Empirical evidence from a Panel VAR approach

The current literature on the tourism-economic growth causal relationship has not yet reached to a clear empirical consensus. The aim of this paper is to revisit this ambiguous relationship by examining the dynamics between tourism and economic growth from a more holistic view. In particular, we focus on 113 countries over the period 1995-2011, which we group into clusters based on six different criteria. A Panel Vector Autoregressive model is employed to reveal the tourism-economy interdependencies across these clusters. Overall, our findings cannot support the tourism-led economic growth hypothesis in any of our clusters. Rather, the economic-driven tourism growth hypothesis seems to prevail is most cases, although some short-lived bidirectional causalities are also identified. Thus, depending on the level of tourism competitiveness and economic development different policy implications apply.