Analysing the Effect of Tourism on Economic Growth: In the Case of Selected Small Island Developing States

This study used a relatively novel model of heterogeneous panel autoregressive distributed lag cointegration (ARDL) for reanalyzing Granger causality association amongst tourism growth and economic development in the selected small island developing states (SIDSs). Furthermore, energy usage and foreign direct investment (FDI) are incorporated as alternate development factors, from 1995 to 2014. For a complete and robust analysis, a panel of 10 SIDSs was applied in this study like Bahrain, Cyprus, the Dominican Republic, Haiti, Jamaica, Iceland, Malta, Mauritius, Sri Lanka, and Singapore between 1995 and 2014 from the online database of World Bank. Subsequently agreeing on the heterogeneous nation-state impact, significant equilibrium long-run association amongst tourism, energy usage, FDI, and GDP, with a reasonable convergence ratio is verified. Empirical findings of the study support tourism-induced growth, tourism-induced energy consumption, tourism-induced investment, and the energy consumption-economic growth association in the case of SIDSs. Our empirical results resound with the relevant studies and offer the main policy proposition in the case of SIDSs. Keywords: cointegration; dynamic panel model; economic growth; granger causality; small island developing states tourism earnings.