International tourism and economic growth in New Zealand

Jaforullah, Mohammad

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International tourism and economic growth in New Zealand

Jaforullah, Mohammad

Cite this item: Jaforullah, M. (2015). International tourism and economic growth in New Zealand (Economics Discussion Papers Series No. 1502). University of Otago. Retrieved from http://hdl.handle.net/10523/5603

Permanent link to OUR Archive version: http://hdl.handle.net/10523/5603

Date: 2015-04

Publisher: University of Otago

Series: Economics Discussion Papers Series

Series number: 1502

ISSN: 1178-2293 (Online)

Keywords: Tourism; Economic growth; cointegration; Granger causality; vector error correction model; New Zealand

Research Type: Discussion Paper

Languages: English

Abstract:

This paper examines whether the tourism-led growth hypothesis holds for the New Zealand economy. Using unit root tests, cointegration tests and vector error correction models, and annual data over the period 1972-2012 on international tourism expenditure, real gross domestic product (GDP) and the exchange rate for New Zealand, it finds that the tourism-led growth hypothesis holds for New Zealand. The long-run elasticity of real GDP with respect to international tourism expenditure is estimated to be 0.4, meaning that a 1% growth in tourism will result in a 0.4% growth of the NZ economy. This finding implies that the New Zealand Government’s policy to promote New Zealand as a preferred tourism destination in the key international tourism markets may boost economic growth.

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