Abstract:
The causal link between tourism receipts and GDP has recently become a major
focus in the tourism economics literature. Results obtained in recent studies about
the causal link appear to be sensitive with respect to the countries analysed,
sample period and methodology employed. Considering the sensitivity of the
causal link, we use rolling window and time-varying coefficient estimation
methods to analyse the parameter stability and Granger causality based on a
vector error correction model (VECM). When applied to South Africa for the
period 1960–2011, the findings are as follows: results from the full-sample
VECM indicate that there is no Granger causality between tourism receipts and
GDP, while the findings from the time-varying coefficients model based on the
state-space representation show that tourism receipts have positive-predictive
content for GDP for the entire period, with the exception of the period between
1985 and 1990. Full-sample time-varying causality tests show bidirectional
strong causality between tourism receipts and GDP.
