The contribution of tourism to the economic growth of Pacific Island countries (PICs) has achieved significance in the past decade. The shift in the economic policies of the PICs from the late 1980s has been decisively away from import substitution and agriculture to urban-based manufacturing and services sectors. Tourism is the main component of the services sector in the PICs. The contribution of tourism to economic growth in Fiji, Tonga, the Solomon Islands and Papua New Guinea is expected to grow. The authors use panel data for the four PICs to test the long-run relationship between real GDP and real tourism exports. They find support for panel cointegration and the results suggest that a 1% increase in tourism exports increases GDP by 0.72% in the long run and by 0.24% in the short run.
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AbstractPurpose -This paper aims to examine the export-led growth hypothesis for Fiji and Papua New Guinea (PNG). Design/methodology/approach -The paper investigates the export-led growth hypothesis for Fiji and PNG who have been facing dismal economic growth performances over the last couple of decades. Findings -Findings of the study suggest that for Fiji there is evidence of export-led growth in the long-run, while for PNG there is evidence of export-led growth in the short-run. Originality/value -The findings of this paper have important messages for policy makers given that export sectors in both countries investigated are underdeveloped due mainly to a sustained period of political instability.
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