Macroeconomic impacts of the tourism industry and the contemporaneous feedback effect: an Australian case study

Chaiechi, Taha;Pryce, Josephine;Bhati, Abhishek

Abstract

The aim of this paper is to demonstrate methods for analysing the dynamic impact of the tourism sector on key drivers of economic growth for destinations in Australia, while allowing for simultaneity of economic variables. The tourism sector is captured through the proxy of 'tourism receipts'. In addition, investment and productivity growth are selected as sources of economic growth, in accordance with Post-Keynesian growth theory. The paper uses time series quarterly data, covering the period 1995:Q1–2011:Q4, and employs time series estimation techniques, including Structural Vector Autoregressive modelling and impulse response analysis, to describe the macroeconomic responses to sudden shocks in the tourism sector. The results indicate that the growth benefits of an increase in tourist expenditure are positive and statistically significant. Moreover, as suggested by the analysis of impulse response functions, a positive shock to tourist expenditure provides positive, substantial and rather long-lived implications regarding productivity and investment decisions.

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Tourism Economics

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2044-0375

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IP Publishing

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DOI

10.5367/te.2013.0364