Tourism and Trade: Cointegration and Granger Causality Tests

Abstract

This study uses Singapore data to examine cointegration and causal relationships between trade and tourist arrivals. This was done with respect to ASEAN, the United States, Japan, the United Kingdom, and Australia. We discovered that, contrary to the findings of others done with data from Australia, cointegration between tourism and trade exists but is not common. Granger causality is even rarer. Nevertheless, we found a strong link between business visits and imports, because businesspeople who intend to export must visit the host country. Conversely, imports encourage the exporters to visit their markets to strengthen trade ties. Business travelers appear to be selling rather than buying, because business arrivals Granger-cause imports but not exports. We also found no correlation or Granger causality within integrated trading blocks, because their integrated economies do not allow them to be treated as trading partners in the traditional sense.

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