Asymmetric reactions in the tourism‐led growth hypothesis

Abstract

In this study, we test for asymmetries in the tourism‐led growth hypothesis. Asymmetric causality tests allow us to examine whether positive or negative changes in tourism cause growth. Our specification is based on an extended Solow growth model and draws from recent articles on tourism and growth. Using Tonga as a case study over the period 1981–2018, we find that tourism asymmetrically Granger causes economic growth. The magnitude of effects from the nonlinear ARDL model shows that economic growth is more sensitive to a downward movement compared to an upward movement in visitor arrivals.

Modelling the asymmetric productivity effects of tourism demand

“…Research on asymmetries in the TLGH includes Kumar et al (2020, 2022a, b), Eyuboglu and Eyuboglu (2020), Balsalobre-Lorente et al (2021), and Liu et al (2022). Kumar et al (2020) find that positive unit shocks to tourism increase growth by a larger amount than negative unit shocks reduce growth.…”

“…Kumar et al (2020) find that positive unit shocks to tourism increase growth by a larger amount than negative unit shocks reduce growth. Balsalobre-Lorente et al (2021) and Kumar et al (2022a) find that negative unit shocks in tourism reduce growth by a larger amount than positive shocks increase growth. In contrast to both, Kumar et al (2022b) find that only positive tourism shocks significantly increase economic growth in Papua New Guinea.…”

“…With a convex SAS, any increase in aggregate demand would result in successively smaller contributions to growth. Therefore, negative tourism shocks are likely to reduce growth by a larger amount than positive shocks would increase growth (Balsalobre-Lorente et al, 2021; Kumar et al, 2022a). Directional asymmetries can be considered nested within asymmetries arising from the business cycle.…”

Modelling of nonlinear asymmetric effects of changes in tourism on economic growth in an autonomous small-island economy

“…The third study (Kumar et al, 2022a) used annual data from Tonga from 1981 to 2018. The relationship between tourism and economic growth in this case was found to be bidirectional.…”

“…The NARDL approach allows the researcher to highlight differences both in terms of coefficient size and causality effects. It has therefore begun to be adopted by researchers interested in the TLGH (e.g., Bastidas-Manzano et al, 2020; Charfeddine & Dawd, 2022; Husein & Kara, 2020; Kumar & Patel, 2022; Kumar et al, 2020Kumar et al, , 2022aKumar et al, , 2022b. Such studies have, however, tended to produce inconsistent results, with some suggesting strong asymmetry in the relationship between tourism receipts and growth in the destination economy and others not.…”