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This study investigates the association between economic growth and the tourism in Sri Lanka using cointegration analysis for the period 1980 to 2019.The analysis was performed using Augmented Dickey-Fuller test, Philips-Perron test, Engle-Granger cointegration and Granger causality tests. The results revealed that a long-run equilibrium relationship among variable while there is a disequilibrium in short run. The estimated error correction term is theoretical acceptable and approximately 5 percent yearly correction of its disequilibrium in the short run was found. Granger causality test presented a long-run unidirectional causality which is running from tourism to economic growth and thus findings confirm the tourism-led growth hypothesis in Sri Lanka tourism and development spectrum. Therefore, tourism has a significant positive impact on the economic activities in the long run. Findings further emphasis that benefits of the economic development must be transferred to further development of the tourism to maintain a bilateral causality which is an important concept in this regard. It provides the rationale for further development of productive policy strategies to attract more tourists to the country and to upsurge visitor expenditures during their stay in Sri Lanka since Sri Lanka has significantly developed its accommodation capacities. Findings further reveals that tourism sector must be developed parallel to the economic development to boost the growth through tourism. Therefore, it is necessary that all sectors, the government, private bodies, and voluntary organizations should become active partners in this endeavor and policy implication need the focus of every aspect of enhancing tourism as growth engine.
Copyright (c) 2021 Kurukulasooriya Nisantha, Lelwala Erandathie
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