Contribution of Tourism and Foreign Direct Investment to Gross Domestic Product: Econometric Analysis in the Case of Sri Lanka

Abstract

The purpose of the study to evaluate the contribution of foreign direct investment (FDI) and tourism receipts (TR) to Sri Lanka's gross domestic product (GDP). This study employs time series annual data for the period from 1978 to 2016 and EViews 10 econometrics software was used for the time series data analysis. Unit root test was done on the variables and the method chosen was the Augmented Dicky -Fuller test. Co-integration analysis was used for the long run relationship and the Granger causality test was performed to investigate the causal relationship. Recently a more conducive environment has been established after the three decade long ethnic war came to an end. In this context, the Sri Lankan government has taken positive measures to attract foreign direct investment and boost tourism in the country. This study intends to evaluate the contribution of Sri Lanka, as these two factors are considered to be very effective at increasing the GDP of a country. The empirical study shows that there is a positive and statistically significant relationship between the variable's TR and FDI to the GDP in the long run. Results of Granger causality test implied that the two-way causality promoted the economic growth of Sri Lanka.

Overtourism in Jeju Island: The Influencing Factors and Mediating Role of Quality of Life

“…It is deeply understandable that Dodds and Butler (2019) noted that, not only residents who are related to tourism business, but also those who are not directly engaged in the business at the tourist destinations may get the same stress which reduces their quality of life as a result of quantitative expansion of the tourism industry, being a foundation of the local economy. Mustafa (2019) emphasized the importance of tourism business due to its multiplier effect especially in the developing countries. Nevertheless, residents of Jeju do not deny the economic effects of tourism in this study case.…”

“…Tourism is widely known to provide advantages to tourists like relaxation, recreation, adventure and cultural experiences while generating income and employment at the destination places (Hall & Rath, 2007;Mustafa, 2019;Pham, Andereck, & Vogt, 2019). Among the effects of tourism, many studies have been conducted on the economic benefits and disadvantages of tourism (Archer, Cooper, & Ruhanen, 2005;Diedrich & García-Buades, 2009;Vogel, 2016), which is considered the most important.…”

Effects of Foreign Direct Investment and Quality of Informal Institution on the Size of the Shadow Economy: Application to Vietnam

“…First, FDI helps improve institutional quality (Larrain & Tavares, 2004;Kwok & Tadesse, 2006;Dang, 2013;Long, Ngoc, & My, 2018), and better institutional quality, in turn, reduces shadow economy (Johnson et al, 1998;Friedman et al, 2000;Fugazza & Jacques, 2003;Torgler & Schneider, 2009;Dreher et al, 2009;Dreher & Schneider, 2010;Razmi et al, 2013). Second, FDI has a positive effect on the growth of the formal economy (Romer, 1994;Choe, 2003;Li & Liu, 2005;Long et al, 2018;Mustafa, 2019;Nantharath & Kang, 2019), so that it reduces the size of the shadow economy (La Porta & Shleifer, 2014;Williams, 2008). Third, FDI creates employment (Lall, 1995;Blomström, Fors, & Lipsey, 1997), raises wages (Heyman, Sjholm, & Tingvall, 2007), and improves labor productivity (Le, Duy, & Ngoc, 2019), thus reducing the size of the shadow economy (Boeri & Garibaldi, 2002;Dell'Anno & Solomon, 2008).…”

Beyond Growth: Does Tourism Promote Human Development in India? Evidence from Time Series Analysis

“…The economic impact of tourism has been explored through the tourism-led growth hypothesis in numerous studies. The hypothesis derives the theoretical ground based on another hypothesis that advocates that rising exports raise economic growth named as ELGH hypothesis (Balassa, 1978;Ohlan, 2017;Mohamed Mustafa, 2019). Many researchers have argued for the tourism sector's positive influence on sustaining and promoting growth in both country specific and panel studies.…”