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Tourism: An International Interdisciplinary Journal, Vol. 71 No. 3, 2023.

Original scientific paper

https://doi.org/10.37741/t.71.3.11

Growth-Led Tourism and the Role of Exchange Rate: Empirical Evidence from Sri Lanka

Bosede Ngozi Adeleye orcid id orcid.org/0000-0002-1274-714X ; Department of Accountancy, Finance and Economics, University of Lincoln, United Kingdom; Lincoln International Business School, University of Lincoln, United Kingdom; Centre for Economic Policy and Development Research (CEPDeR), Covenant University, Nigeria
Hammed Oluwaseyi Musbahu ; Department of Economics, University of Tasmania, Australia; University of Economics, Ho Chi Minh City, Vietnam; Department of Agriculture and Fisheries, Queensland Government, Australia
Hauwah K. K. Abdulkareem orcid id orcid.org/0000-0003-1300-4126 ; Department of Economics and Development Studies, Kwara State University, Malete, Nigeria
Asma Kanwal ; University of Management and Technology, Lahore, Pakistan

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Abstract

We re-visit the growth-led tourism hypothesis to examine the role of the exchange rate in the nexus. Using yearly data on Sri Lanka from 1995 to 2018, preliminary tests reveal a long-run association between tourism receipts, economic growth, and the official exchange rate. Consistent robustness results from a battery of econometric techniques validate that the connection holds autonomously and interactively. Conclusions drawn from the linear models suggest that a percentage change in economic growth increases tourism by 0.8% to 1.2%. Likewise, the exchange rate boosts tourism by 0.006% to 0.008%, on average, ceteris paribus. For the most part, the interaction of the exchange rate with economic growth upholds the "growth-led tourism" hypothesis. We also find that the results hold across the conditional distribution of tourism. Additional evidence from the margin plot reveals that the effect of economic growth on tourism is positive as the Sri Lankan Rupee depreciates. The upward trend of the plot within the 95% confidence interval shows that currency depreciation enhances the impact of economic growth on tourism. These are novel contributions to the literature as it suggests that currency depreciation in Sri Lanka is pro-tourism. Policy recommendations are discussed.

Keywords

exchange rate; tourism; economic growth; Sri Lanka

Hrčak ID:

305388

URI

https://hrcak.srce.hr/305388

Publication date:

4.7.2023.

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