The relationship between tourism and economic growth among BRICS countries: a panel cointegration analysis

Abstract

Tourism has become the world’s third-largest export industry after fuels and chemicals, and ahead of food and automotive products. From last few years, there has been a great surge in international tourism, culminates to 7% share of World’s total exports in 2016. To this end, the study attempts to examine the relationship between inbound tourism, financial development and economic growth by using the panel data over the period 1995–2015 for five BRICS (Brazil, Russia, India, China and South Africa) countries. The results of panel ARDL cointegration test indicate that tourism, financial development and economic growth are cointegrated in the long run. Further, the Granger causality analysis demonstrates that the causality between inbound tourism and economic growth is bi-directional, thus validates the ‘feedback-hypothesis’ in BRICS countries. The study suggests that BRICS countries should promote favorable tourism policies to push up the economic growth and in turn economic growth will positively contribute to international tourism.

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“…They confirm that further specialization in tourism was likely to promote economic growth in Macao and Malaysia. Rasool et al (2021) conclude that BRICS should design tourism policies able to shove economic growth.…”

“…Although even before 2002, there were clear hints of interest in the relationship between tourism and economic growth, it was mainly after the first formal reference to the tourism-led growth hypothesis (Balaguer and Cantavella-Jordá 2002) when the empirical evidence started to increase considerably. Based on the previous empirical evidence (Adedoyin and Bekun 2020;Brida et al 2016a;Balsalobre-Lorente et al 2021a, b;Pérez-Montiel et al 2021;Usman et al 2020;Rasool et al 2021), there are mainly four hypotheses when exploring the link between tourism and economic growth (Chatziantoniou et al 2013): (a) two hypotheses based on the unidirectional causality between tourism and economic growth, either from tourism to economic growth (tourism-led economic growth hypothesis, TLGH) or from economic growth to tourism (economic-driven tourism growth hypothesis, EDTH); (b) one hypothesis supporting the existence of bi-directional causality (bi-directional causality hypothesis); and (c) another hypothesis defending no relationship at all (no causality hypothesis). Still, the results are mixed and sample-dependent (Kumar Mitra 2018) and even conflicting despite the homogeneity of the research methods chosen (Katircioğlu 2014;Roudi et al 2019;Rasool et al 2021).…”

“…Based on the previous empirical evidence (Adedoyin and Bekun 2020;Brida et al 2016a;Balsalobre-Lorente et al 2021a, b;Pérez-Montiel et al 2021;Usman et al 2020;Rasool et al 2021), there are mainly four hypotheses when exploring the link between tourism and economic growth (Chatziantoniou et al 2013): (a) two hypotheses based on the unidirectional causality between tourism and economic growth, either from tourism to economic growth (tourism-led economic growth hypothesis, TLGH) or from economic growth to tourism (economic-driven tourism growth hypothesis, EDTH); (b) one hypothesis supporting the existence of bi-directional causality (bi-directional causality hypothesis); and (c) another hypothesis defending no relationship at all (no causality hypothesis). Still, the results are mixed and sample-dependent (Kumar Mitra 2018) and even conflicting despite the homogeneity of the research methods chosen (Katircioğlu 2014;Roudi et al 2019;Rasool et al 2021). While, TLGH defends that tourism, through a series of benefits, can promote economic growth via different routes (Schubert et al 2011;Brida et al 2016a;Shahzad et al 2017;Balsalobre-Lorente et al 2020a, b;Tecel et al 2020), mastering the specialized literature, little evidence was found in line with EDTH (Narayan 2004;Oh 2005;Payne and Mervar 2010).…”

“…The relevance and the determinants of economic growth and development have been studied broadly in advanced and emerging economies, being tourism one of its determinants as supported by the TLGH. The importance of tourism has grown exponentially given the multiple benefits tourism present due to employment opportunities and job creation, foreign exchange production, household income and government revenue through multiplier effects, the balance of payments improvements and growth in the number of tourism-promoted government policies (Brida et al 2016a;Rasool et al 2021).…”

“…The stability of welldesigned economic policies, governance structures and physical and human capital investments seem to promote tourism growth (Payne and Mervar 2010). A series of development activities would be created with such context, which can considerably contribute to tourism development (Rasool et al 2021). On bi-directional causality grounds, some evidence was found (Lee and Chang 2008;Ridderstaat et al 2014).…”