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Abstract

This paper re-tests the tourism-led growth hypothesis (TLGH) by estimating panel smooth transition regression models using two different transition variables. The panel data set includes the annual data of 15 OECD countries for the period 1995–2010. The empirical results indicate that the relationships between growth and its determinants are non-linear and vary with time and across countries. Although the TLGH remains valid, the tourism elasticities of growth are small and vary inversely with the one-period lagged exchange rate return and proportionally with the two-period lagged inflation rate. There is a trade-off between employing export policies and employing tourism policies to promote economic growth, and the main impetus behind growth in the sample countries is the increase in human capital.

Keywords

tourism-led growth hypothesis panel smooth transition regression model lagged exchange rate lagged inflation rate

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Re-Testing the Tourism-Led Growth Hypothesis Using Panel Smooth Transition Regression Models

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