Tourism and economic growth in South Africa: Evidence from linear and nonlinear cointegration frameworks

Abstract

Tourismis increasingly being recognized as an essential component of economic growth in South Africa. The purpose of this study is to examine cointegration and causal effects between tourism and economic growth in South Africa for annual data collected between 1995 and 2014. To this end, the paper contrasts two empirical approaches; (1) Engle and Granger (1987) linear cointegration framework, and (2) Enders and Granger (1998) nonlinear cointegration framework. Furthermore, two empirical measures of tourism development are used in the study, namely; tourist receipts and number of international tourist arrivals. The empirical results of the linear framework supports the tourism-led growth hypothesis when tourist receipts are used as a measure of tourismdevelopment.However, the nonlinear framework depicts bi-directional causality between tourist receipts and economic growth. Also, the linear framework supports the economicgrowth-driven-tourism-hypothesis for tourist arrivals whereas the nonlinear framework depicts no causality between tourist arrivals and economic growth.