| Abstract: |
This study aimed at exploring the relationship between international tourism
receipts and economic growth in Kenya using a time series data of the period
1980 to 2013. Specifically it sort to answer two questions on causality
between international tourism receipts and economic growth as well as the
effect of international tourism receipt on Kenyan’s economic growth. The study
applied OLS regression, Cointegration and Granger causality test to obtain the
study objectives. Results from OLS regression showed that all variables are
statistically insignificant except average wage and gross fixed capital
formation in determining the economic growth of Kenya under the period of
study. Equally result from the causality test showed that all variables in the
model were cointegrataed in the long run implying they could be used to
explain changes in Kenyan economic growth within the period under study.
However, in the short run, the study found a unidirectional causality which
ran from international tourism receipts to economic growth. The study findings
conforms to Lee and Chang (2008), Oh (2005), and Bridaet. al, (2008b) who
found a causality running from international tourism receipts to economic
growth but contradicts Kim et. al, (2006) whose causality was a bidirectional.
The study recommends government intervention into the sector through relevant
policies such as strengthening the tax body (KRA) on all foreign companies
dealing with tourism activities within the country so as to maximize gains
from such companies, investing more funds to the industry through improving
infrastructure to the attraction sites as well as incorporating the
communities around the attraction sites as tour guides to enhance welfare
distributions from the gains from the tourism sector. |