Analysis of Causality between Tourism and Economic Growth Based on Computational Econometrics

To investigate the causal relationship between China’s domestic tourism and economic growth, this paper performs co-integration analysis and Granger causality test by making use of annual time series data from 1984 to 2009. Co-integration analysis indicates that there are long-term and stable equilibrium relationships between the development of China’s domestic tourism and economic growth. The results from the ECM model indicate that there are short-term disequilibrium relationship between the development of China’s domestic tourism and economic growth. An adjustment mechanism from short term to long term in the relationship between the development of China’s domestic tourism and economic growth can be found in the ECM model. In addition, bidirectional Granger causality between China’s domestic tourism and economic growth is demonstrated. The development of China’s domestic tourism is the Granger cause of economic growth, China’s economic growth is the Granger cause of development of domestic tourism as well. Our findings imply that China may enhance its economic growth by strategically strengthening the tourism industry while not neglecting the other sectors which also promote growth.