Tourism as a Long-Run Economic Growth Factor: An Empirical Investigation for Greece Using Causality Analysis

This paper empirically examines the impact of tourism on the long-run economic growth of Greece by using causality analysis of real gross domestic product, real effective exchange rate and international tourism earnings. A Multivariate Auto Regressive (VAR) model is applied for the period 1960:I-2000:IV. The results of co-integration analysis suggest that there is one co-integrated vector among real gross domestic product, real effective exchange rate and international tourism earnings. Granger causality tests based on Error Correction Models (ECMs), have indicated that there is a ‘strong Granger causal’ relationship between international tourism earnings and economic growth, a ‘strong causal’ relationship between real exchange rate and economic growth, and simply ‘causal’ relationships between economic growth and international tourism earnings and between real exchange rate and international tourism earnings.