Are there Asymmetric Causal Relationships between Tourism and Economic Growth in a Panel of G-7 Countries?

The aim of this paper is to analyse the relationship between tourism activity and economic performance for G-7 countries. This paper attempts to answer two questions. Firstly, it will look at whether economic growth causes increased tourism activity for Italy, Canada, Japan, France, the UK, the US and Germany. Secondly and most importantly, the paper will address the question of whether increased tourism activity causes economic growth for these countries. That is, the authors aim to examine whether the tourism led hypothesis is valid for any of these countries. This is done by applying the asymmetric panel causality test suggested by Hatemi-J (2011) to these countries for the period 1995-2012. This approach is an attempt to find out which tourism shocks, negative or positive, have a greater impact on economic performance and which of the GDP shocks have a greater impact on tourism activity for each country. The results show that there is a causal relationship between tourism activity and economic growth, with GDP actively causing tourism activity for Canada, Germany, France, Italy and Japan. In this case, Canada and Germany are the only two countries where a symmetric causal relationship is found. More importantly, the results further show that tourism activity causes GDP growth for Germany, France, Italy and US. Germany, France, and the US, however, are the only three countries where a symmetric causal relationship is found. Further, one could conclude that the TLGH is not valid for G-7 countries given that positive tourism activity shocks do not lead to positive economic output shocks for any of the countries.