Empirical investigation of the relationship between tourism receipts and sustainable economic growth in Sri Lanka

Abstract

Tourism is one of the largest and fastest growing industries in the world. Tourism has become one of the most significant sectors in many developing countries. Tourism has been identified as one of key industries in promoting sustainable economic growth and development of Sri Lanka. The aim of this study is to investigate long-run and shortrun relationship between tourism and economic growth in Sri Lanka. Using annual data covering the period of 1978 to2011. Minitab, Excel and E-views software were used for data analysis. Time-series econometrics techniques were used, namely Augmented Dickey-Fuller (ADF) for unit root test, Engle–Granger for co-integration, and Granger causality test for causal relationships. The findings of the study showed that there is a positive relationship between tourism receipts and economic growth in the long-run and Granger causality test results revealed that the unidirectional causality from tourism earnings helped the economic growth. The results of this study suggests that government should focus on economic policies to promote more international tourism as a potential source for sustainable economic growth in Sri Lanka