Examining the stability of the long-run relationship between tourism and economic growth for Puerto Rico

Abstract

This study empirically examines the stability of the long-run relationship between tourism and economic growth for Puerto Rico using annual data for 1960-2016. Robust results across several model specifications support the existence of a long-run equilibrium relationship between real GDP, real tourism receipts, and real exchange rate. Contrary to many previous studies that either explicitly or implicitly assume the stability of the cointegrated vector, the authors apply formal stability tests developed by Hansen and Johansen to investigate the long-run parameter constancy issue. Tests for long-run parameter stability reveal that the hypothesis of stable long-run parameters could not be rejected. The results indicate that tourism is a stable source of economic growth for Puerto Rico and Granger causality tests based on the error-correction model indicate a unidirectional causality from tourism receipts to real GDP.

Impact of Economic Policy Uncertainty and Pandemic Uncertainty on International Tourism: What do We Learn From COVID-19?

“…This study is a timely addition to increasingly important strands of the tourism literature. Though tourism is a stable economic growth source ( Husein et al, 2020 ; Wu et al, 2020 ), COVID-19 has drastically affected the tourism sector. Social distancing policies designed to prevent virus transmission imply a particularly negative supply shock for the tourism industry.…”