| Abstract: |
In this study, the dynamic Granger-causality between tourism development and
economic growth in South Africa was empirically examined during the period
1995-2016. The study was motivated by the growing important role of the
tourism sector in economic growth and development. It was also motivated by
the limelight that the South African tourism sector has been enjoying in
recent years, on the one hand, and the lack of sufficient coverage of
tourism-growth nexus studies in many sub-Saharan African countries, on the
other hand. Unlike some previous studies that used one proxy, the current
study used two tourism proxies, namely tourist arrivals and tourism revenue,
to examine this link. In addition, the study used exchange rate and foreign
direct investment as intermittent variables in a multivariate
Granger-causality model in order to address the omission-of-variable bias. To
enhance the robustness of the results, the study also used two measures of
tourism revenue, namely total tourism revenue and total tourism revenue as a
percentage of GDP. Using the auto-regressive distributed lag (ARDL)-bounds
testing approach and the error correction model, the study found that the
direction of causality between tourism development and economic growth in
South Africa is sensitive to the proxy used and the time under consideration.
When the tourist arrivals variable is used as a proxy for tourism development,
bidirectional causality between tourism development and economic growth is
found to prevail in the short run, while a unidirectional causality from
economic growth to tourism development is found to dominate in the long run.
However, when tourism revenue is used as a proxy, a feedback relationship is
found to prevail, but only in the short run. The result is robust across the
two different measures of tourism revenue. The study, therefore, recommends
that short-term policy efforts should be directed at developing the tourism
sector and the real sector as both sectors have been found to reinforce each
other in the short run, irrespective of the tourism proxy used. |