Empirical Study on Tourism and Economic Growth of Bahrain: An ARDL Bounds Testing Approach

Abstract

This paper empirically investigates the tourism-led-growth hypothesis (TLGH) in case of Bahrain. Using time series econometrics techniques the study examines the long run relationship between international tourism and economic growth in Bahrain by using Autoregressive Distributed Lag (ARDL) model over the period of 1990 to 2014. The results obtained from the analyses show that there is a positive relationship between tourism development and economic growth in Bahrain. Moreover, the results indicate that there is unidirectional Granger causality flow from tourism to economic growth in Bahrain. Hence, the development of tourism activity will thus have a positive impact on Bahrain economy. Our findings imply that Bahrain may enhance its economic growth by strategically strengthening the tourism industry in the country.