Is the Tourism Sector Supportive of Economic Growth? Empirical Evidence on Romanian Tourism

Abstract

This paper studies the long-run relationships between tourism expansion and economic growth in Romania during the period 1988–2009. The empirical evidence highlights the nature of causal relationships, if any, between domestic travel and tourism spending, internal travel and tourism consumption, the gross domestic product annual growth rate and the real exchange rate. The paper uses the cointegration method and Granger causality analysis based on the vector error correction model (VECM) and impulse functions. The findings suggest that there are Granger causality relationships running from tourism expansion to economic growth, which sustains the tourism-led growth hypothesis (TLGH). These results emphasize the need for more consistent tourism development plans and strategies to be implemented at national and regional levels by the governmental authorities.

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