Tourism and the Output Gap

Abstract

This article investigates the impact of tourism arrivals on a host country’s output gap, defined as the difference between actual gross domestic product (GDP) and trend GDP. Using panel data methods that account for the potential endogeneity of tourism and the business cycle, and the possible nonstationarity of tourism arrivals, the results show that an increase in tourism arrivals significantly improves the output gap of the host country. Quantitatively, a 10% increase in arrivals in a given year improves the output gap in that year by approximately 0.2% of actual GDP. There is, however, no evidence of a lagged effect of tourism. Based on this empirical evidence, the article concludes that tourism is a mechanism through which the domestic economy can take advantage of positive shocks happening elsewhere in the world. In this sense, tourism can contribute to the synchronization of business cycles between destination and origin countries.

A Structural Change and Productivity Perspective of Tourism’s Contribution to Economic Growth: The Case of Zhangjiajie in China

“…In the recent decade, the majority of empirical studies examining tourism’s economic contribution has been around testifying the so-called tourism-led growth hypothesis (TLGH, Balaguer and Cantavella-Jordá 2002; Brida and Risso 2009; Tang and Tan 2013; Lee and Chang 2008; Dritsakis 2004; Po and Huang 2008; Durbarry 2004; Bojanic and Lo 2016; De Vita and Kyaw 2017; D. Du, Lew, and Ng 2016; Chiu and Yeh 2017; Zuo and Huang 2018; Carmignani and Moyle 2018). Tourism is seen as a form of export (Chang, Khamkaew, and McAleer 2010; Chou 2013), which can not only inject cash flow into the economy to “fuel” the import of goods and services but also serve as a component of aggregate demand to generate domestic production (Cortés-Jiménez, Nowak, and Sahli 2011; Castro-Nuño, Molina-Toucedo, and Pablo-Romero 2013; Lin, Yang, and Li 2018).…”

Output gap determinants in Ethiopia

“…Output gap can be measured as the difference between actual and trend GDP in the percentage of actual GDP (Carmignani & Moyle, 2018). Potential output (GDP) on the other hand is designated as a measure of the aggregate supply of an economy.…”

“…High inflation was also seen during the same period, which attributes to the transition to a market economy the country achieved through trade openness and privatization. Carmignani and Moyle (2018) investigated the impact of tourist arrivals on a host country's output gap. By using a panel of 179 countries for the period 2002 up to 2015, and panel data methods, the results showed that an increase in tourism arrivals significantly lowers the output gap of the host country.…”

Revisiting tourism’s additional impact on income

“…As in the previous literature (Alderighi and Gaggero, 2018; Carmignani and Moyle, 2019; Chen, 2016; Du et al, 2016; Gao et al, 2019; Gunduz and Hatemi-J, 2005; Nepal et al, 2019; Santana-Gallego et al, forthcoming; Yang et al, 2019), this study uses the number of international tourist arrivals as the measure of tourism activity. Although some studies also use international tourism receipts (current US$) to measure tourism activity, international tourism receipts might be less informative than international tourist arrivals because international tourists can create non-dollar or intangible effects.…”