The Role of Tourism Activity in Economic Growth by Using Some Econometric Models Evidence from Jordan

Abstract

Tourism is used as a vital strategy to reach greater economic productivity. The aim of this paper is to investigate the dynamic relationship between touruism growth and economic growth, using annual time series data from Jordan over the period (1990-2016). The study used a variety of methods based on the cobb-Douglus production function, the Koyck geometrical lag model, cointegration analysis, error correction model and causality analysis. We reveal if tourism leads to economic growth or growth leads to tourism development or bidirectional relation exists between two variables. According to the results, there are moderately increasing return to scale in tourism sector. In addition to there is a positive long-term equilibrium relation related to growth with both fixed assets and tourism balance. The results of the Granger causality test have demonstrated the unidirectional hypothesis, where tourism development leads to economic growth. This paper presented a set of suggestions that would improve Jordan's competitiveness in tourism.