Do Tourist Expenditures Matter for Growth in Botswana? A Vector Auto Regression Approach

Strike Mbulawa, Samuel Chingoiro

Abstract


The study examines the role of tourism as a potential driver of economic growth in a middle-income economy. Specifically, the study analyzes the short run relationship between economic growth and tourist expenditures using annual time series data from 1980 to 2015. The study is motivated by the fact that tourism is being given priority in devising strategies for rural and national development. Botswana has enjoyed economic growth since independence at an annual average of 9, which isconsidered one of the fastest in the world. Though mining revenues have been given the credit for the development of the economy, it is also important to realize the contribution of other important sectors like tourism in the context of an emerging economy. Using the vector auto regression approach, the study supports unidirectional causality moving from tourist expenditures to growth. Findings show that growth responds immediately to shocks in tourist expenditures up to six periods. However, tourism expenditures are not a key driver of growth and their effect on growth face diminishing returns. Demand side policies should focus on reducing inflationary pressures, which improves demand for products by tourists and increases growth. Supply side policies should focus on providing adequate finances to tour operators and tax incentives. These can improve the level of innovation and infrastructure development that are important in extending the impact of tourist expenditure on growth beyond six periods. They will also improve the contribution by fdi inflows in improving tourist expenditures.

Keywords: Botswana, tourism, causality, economic growth


Full Text:

PDF

References


Adamou, A. and Clerides, S. (2009). Tourism development and growth: International evidence and lessons for Cyprus, Cyprus Economic policy review, 3(2), pp 3-22.

Adamou, A. and Clerides, S. (2009), Prospects and limits of tourism led growth: The international evidence, The Rimini Center for Economic Analysis, Working Paper 41/09.

Botswana Tourism Master Plan (BTMP). (2000), Botswana Tourism Development programme, Project No.7 ACP. BT. 4/No. 6 ACP BT 44. Available at: http://www.ub.bw/ip/documents/ (Accessed on 10 November 2016)

Dickey, D. A., and W. A. Fuller. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association 74: 427–431.

Ekanayake, E, M. and Long, A, E. (2012). Tourism development and economic growth in developing countries, The international journal of business and finance research, 6(1), pp 51-63.

Engle, R. F. and Granger, C. W. J. (1987) “Co-integration and Error Correction: Representation, Estimation, and Testing”. Econometrica, vol. 55, pp. 251-276.

Eugenio-Martin, J, L, Morales, N, M. and Scarpa, R. (2004), Tourism and economic growth in Latin American countries: A panel data approach, Nota Di lavoro 26. 2004. Paper presented at the International conference on Tourism and Sustainable development – Macro and Micro Economic Issues, Sardinia, Italy, 19-20 September, 2004.

Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica 37: 424–438.

Holzner, M. (2010), Tourism and economic development: the beach disease? The Vienna Institute for International Economic studies, Working paper, 66, June 2010.

Homafar, F, Honari, H, Heidary, A, Heidary, T. and Emami, A (2011), The role of sport tourism in employment, income and economic development, Journal of hospitality management and tourism, 2(3), pp 34-37.

Joseph, S, van Waarden, C, Mbaiwa, J, Brooks, C, Arntzen, J. and Setlhogile, T. (2010), Tourism and heritage development, Centre for Applied research and department of Environmental Affairs, Makgadikgadi Framework Management Plan, Volume 2, Technical reports, Gaborone.

Makochekanwa, A. (2013), An analysis of tourism contribution to economic growth in SADC Countries, Botswana Journal of economics, 11, pp 42-56.

McCatty, M. and Serju, P. (2006). Tourism, economic growth and employment, Bank of Jamaica, working paper. Retrieved from: www.ccmfuwi.org/files/publications/conference/918.pdf (Accessed on 02 November 2016)

Ministry of Environment, Wildlife and Tourism (MEWT) (2007), Botswana- Strengthening Tourism statistics and formulation of an experiemental TSA – 2005/2006. Available at: Http://www.gov.bw/Global/citizens_pictures/Tourism%20Statistics.pdf

Narayan, P.K., Narayan, S., Prasad, A., and Prasad B.C. (2010), ‘Tourism and economic growth: a panel data analysis for Pacific Island countries’, Tourism Economics, Vol.16, No.1, pp.169–183.

Nkurayija, J. (2011), The impact of globalization on Africa’s development: Rwandan tourism as key to mobilize revenue and investment, National University of Rwanda.

Padachi, K, Seetanah, B. and Rojid, S. (2010). Tourism and economic growth: African evidence from Panel VAR framework. Retrieved from: https://www.researchgate.net/ (Accessed on 10 November 2016)

RETOSA, (2011) Regional Tourism Growth and Development Strategy draft report

Samimi, A, J, Sadeghi, S. and Sadeghi, S. (2011). Tourism and economic growth in developing countries: A P-VAR Approach, Middle East Journal of scientific research 10(1), pp 28-32.

United Nations Secretariat (2013), Sustainable tourism: Contribution to economic development growth and sustainable development, United Nations conference on Trade and development, Geneva, 14-15 March 2013.

UNWTO. (2004). Tourism and Poverty Alleviation: Recommendations for Action. Madrid: United Nations World Tourism Organization.

Wang, B. and Xia, M. (2013), A study on the relationship between tourism industry and regional economic growth – A case study of Jiangsu Gaochun District, Modern Economy, 2013(4), pp 482-488.

World Bank development indicators (2014): Retrieved from http://data.worldbank.org/indicator/SP.POP.TOTL

World Travel and Tourism Council and Oxford Economics (2013). Methodology for producing the 2013 WTTC / Oxford Economics Travel & Tourism Economic Impact Research. World Travel and Tourism Council. Available at: www.wttc.org.

World Travel and Tourism Council (2016), WTTC data gateway. Retrieved from: https://tool.wttc.org/ (Accessed on 11 November 2016).


Refbacks

  • There are currently no refbacks.