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Tourism and economic growth in South Africa: Evidence from linear and nonlinear cointegration frameworks

Phiri, Andrew (2015): Tourism and economic growth in South Africa: Evidence from linear and nonlinear cointegration frameworks.

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Abstract

This study examines cointegration and causal effects between tourism and economic growth in South Africa for annual data collected between the period of 1995 and 2014. The paper applies two empirical approaches to this end; one being the conventional Engle and Granger (1987) linear cointegration framework, and the second being a nonlinear cointegration framework of Enders and Granger (1998). Furthermore, two empirical measures of tourism development are used in the study, namely; tourist receipts and number of international tourist arrivals. In line with conventional wisdom, the empirical results of the linear framework supports the tourism-led growth hypothesis when tourist receipts are used as a measure of tourism development. However, the nonlinear framework depicts bi-directional causality between tourist receipts and economic growth. Furthermore, the linear framework supports the economic-growth-driven-tourism-hypothesis for tourist arrivals whereas the nonlinear framework depicts no causality between tourist arrivals and economic growth. Therefore, our study emphasizes on the direct relevance which tourist expenditures rather than number of tourist arrivals hold towards economic growth and overall economic development.

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