Tourism expansion and economic development: The case of Taiwan

In Taiwan, tourism and economic development reinforce each other, indicating a long-run equilibrium relationship and further a bi-directional causality between the two factors.

Abstract

This study examines the causal relationship between tourism expansion and economic development in Taiwan. A Granger causality test is performed following the cointegration approach to reveal the direction of causality between economic growth and tourism expansion. Test results indicate a long-run equilibrium relationship and further a bi-directional causality between the two factors. In other words, in Taiwan, tourism and economic development reinforce each other. A discussion follows and managerial implications are identified based on the empirical findings.