Is Tourism a Key Factor for Economic Growth? Fresh Evidence from South Europe Using Panel Cointegration and PVAR Analyses

Abstract

This paper brings fresh empirical evidence on the relationship between tourism and economic growth for ve South European countries over the period 2000Q1-2018Q4 within a multivariate framework. PVAR and panel cointegration analyses are em- ployed to infer the causal relationship between tourism and economic growth. Het- erogeneous panel cointegration test reveals a long-run relationship between real GDP, labour force, gross xed capital formation and tourism. Granger causality validates the bidirectional and unidirectional causal relationship between tourism, labour and economic growth and physical capital and economic growth, respectively. Simultane- ously, impulse-response functions of PVAR model highlight the fact that short-run innovations might have a smaller impact on economic growth against a permanent long-run augmentation of these variables. Our ndings might leave ample room for government policies to stimulate strategies for higher economic growth.