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Effect of tourism on economic growth of Sri Lanka: accounting for capital per worker, exchange rate and structural breaks

Author

Listed:
  • Peter Josef Stauvermann

    () (Changwon National University)

  • Ronald Ravinesh Kumar

    () (The University of the South Pacific
    University of Bolton
    University of Leicester)

  • Syed Jawad Hussain Shahzad

    () (COMSATS Institute of Information Technology)

  • Nikeel N. Kumar

    () (The University of Fiji)

Abstract

Abstract We explore the nexus between tourism, exchange rate and economic growth in Sri Lanka over the period 1980–2014. Using the augmented Solow (Q J Econ 70(1):65–94, 1956) framework and the ARDL bounds procedure whilst accounting for structural breaks using Bai and Perron (J Appl Econ 18(1):1–22, 2003) multiple break tests, the short-run and long-run association and impacts are examined. The results confirm the presence of a long-run association between tourism receipts (% of GDP), exchange rate, capital per worker and output per worker. The regression results show a 1% increase in tourism receipts results in a 0.03 and 0.06% increase in output per worker in the short-run and long-run, respectively. A unidirectional causality is noted from tourism to output per worker; from exchange rate to output per worker and capital per worker; and from output to capital, in per worker terms. Finally, we note that although structural breaks periods have negative association with economic growth, they are not statistically significant.

Suggested Citation

  • Peter Josef Stauvermann & Ronald Ravinesh Kumar & Syed Jawad Hussain Shahzad & Nikeel N. Kumar, 2018. "Effect of tourism on economic growth of Sri Lanka: accounting for capital per worker, exchange rate and structural breaks," Economic Change and Restructuring, Springer, vol. 51(1), pages 49-68, February.
  • Handle: RePEc:kap:ecopln:v:51:y:2018:i:1:d:10.1007_s10644-016-9198-6
    DOI: 10.1007/s10644-016-9198-6
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