International tourism and economic growth in New Zealand
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.
Publisher: University of Otago
Series number: 1502
ISSN: 1178-2293 (Online)
Keywords: Tourism; Economic growth; cointegration; Granger causality; vector error correction model; New Zealand
Research Type: Discussion Paper
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