Analysis of Causality between Tourism and Economic Growth Based on Computational Econometrics

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1 5 JOURNAL OF COMPUTERS, VOL. 7, NO. 9, SEPTEMBER 0 Analysis of Causaliy beween Tourism and Economic Growh Based on Compuaional Economerics WANG Liangju School of Business Adminisraion, Anhui Universiy of Finance and Economics, Bengbu, Anhui, P. R. China acwlj@63.com ZHANG Huihui School of Accouning, Anhui Universiy of Finance and Economics, Bengbu, Anhui, P. R. China jusinwlj@sohu.com LI Wanlian School of Business Adminisraion, Anhui Universiy of Finance and Economics, Bengbu, Anhui, P. R. China jusinwlj@63.com Absrac To invesigae he causal relaionship beween China s domesic ourism and economic growh, his paper performs co-inegraion analysis and Granger causaliy es by making use of annual ime series daa from 984 o 009. Co-inegraion analysis indicaes ha here are long-erm and sable equilibrium relaionships beween he developmen of China s domesic ourism and economic growh. The resuls from he ECM model indicae ha here are shor-erm disequilibrium relaionship beween he developmen of China s domesic ourism and economic growh. An adjusmen mechanism from shor erm o long erm in he relaionship beween he developmen of China s domesic ourism and economic growh can be found in he ECM model. In addiion, bidirecional Granger causaliy beween China s domesic ourism and economic growh is demonsraed. The developmen of China s domesic ourism is he Granger cause of economic growh, China s economic growh is he Granger cause of developmen of domesic ourism as well. Our findings imply ha China may enhance is economic growh by sraegically srenghening he ourism indusry while no neglecing he oher secors which also promoe growh. Index Terms economic growh, domesic ourism, co-inegraion analysis, error correcion model, Granger causaliy es I. INTRODUCTION Tourism is one of he larges and rapid growing secors in he world. The role of ourism o he economic growh and o he progress of modern socieies has become a common awareness in poliical auhoriies worldwide. The fac ha ourism is an economic aciviy of primary value and imporance for many counries is an acceped fac by mos of all. Tourism indusry mainly consiss of such facors as raveling, sighseeing, accommodaion, food, shopping and enerainmen. I is an indusry wih srong comprehensiveness, high indusrial relevance and large pull funcion. Tourism consumpion direcly simulaes he developmen of such radiional indusries as civil aviaion, railway, highway, commerce, food and accommodaion. In addiion, ourism can also promoe he developmen of such modern service indusries as inernaional finance, logisics, informaion consulaion, culural originaliy, movie producion, enerainmen, conferences and exhibiions, and so on. A general consensus has emerged ha i no only increases foreign exchange income, bu also creaes employmen opporuniies, simulaes he growh of he ourism indusry and by virue of his, riggers overall economic growh. As such, ourism developmen has become an imporan arge for mos governmens. The developmen of ourism indusry will conribue o a counry s economic growh. []. I is now considered as an efficien ool for promoing economic growh of he hos counry. Domesic ourism indusry is one of he larges in China s hree ourism markes. China s domesic ourism indusry sared from reforming and opening, and has grown rapidly since he 990s. China s domesic ouris arrivals (DTA) increase o. billion person imes in 00 from 00 million person imes in 984 wih an average annual increasing rae a 9.47 per cen. Meanwhile, China keeps a long-erm, rapid and sable growh of economy since reforming and opening. China s Gross Domesic Produc (GDP) increases o 40. rillion Yuan in 00 from 70.8 billion Yuan in 984 wih an average annual increasing rae a 9.86 per cen (we have eliminaed he effec of inflaion by consumpion prices). From daa above, we can find ou by inuiion ha China s domesic ourism seems o have a same rend of growh wih China s economy. There seems o have a high posiive correlaion beween he developmen of China s domesic ourism and economic growh. To ell 0 ACADEMY PUBLISHER doi:0.4304/jcp

2 JOURNAL OF COMPUTERS, VOL. 7, NO. 9, SEPTEMBER 0 53 he rue sory, i is necessary o perform empirical analysis on he relaionship beween he developmen of China s domesic ourism and economic growh. TABLE I. DOMESTIC TOURIST ARRIVALS AND GROSS DOMESTIC PRODUCT Year DTA(bill) Real GDP(consan 978 CNY rill) Source: Naional Bureau of Saisics of China and Naional Bureau of Tourism of China. Real GDP in 00 is preliminary. The remainder of his paper is organized as follows. In The nex secion reviews some recen lieraures on he ourism-growh. Secion 3 discusses he mehodology used in his paper. Secion 4 explains variables and he daa, and presens he empirical resuls. Secion 5 provides a concluding summary and discussion. II. LITERATURE REVIEW In recen years, he role of ourism in he economic developmen of a counry has been he focus of sudies. There is an increasing and widely acceped belief ha ourism can play a fundamenal role for developing counries o achieve economic growh and developmen. This hypohesis is srongly suppored by some inernaional organizaions such as World Tourism Organizaion (WTO) and World Travel and Tourism Council (WTTC). The developmen of ourism has usually been considered a posiive conribuion o economic growh. Balaguer and Manuel (00) examine he role of ourism in he Spanish long-run economic developmen. The ouris-led growh hypohesis is esed. The resuls indicae ha, a leas, during he las hree decades economic growh in Spain has been sensible o persisen expansion of inernaional ourism. The increase of his aciviy has produced muliplier effecs over ime. Exernal compeiively has also been proved in he model o be a fundamenal variable for Spanish economic growh in he long run []. Drisakis (004) examines empirically he ourism impac on he long-run economic growh of Greece by using he causaliy analysis among real GDP, real effecive exchange rae and inernaional ourism earnings. A mulivariae auoregressive VAR model is applied for he examined period 960: Ι 000: IV. Their resuls of co-inegraion analysis sugges ha here is one co-inegraed vecor among real GDP, real effecive exchange rae and inernaional ourism earnings. Granger causaliy ess based on error correcion models (ECM), have indicaed ha here is a srong Granger causal relaion beween inernaional ourism earnings and economic growh, here is a srong causal relaion beween real exchange rae and economic growh, while he relaion beween economic growh and inernaional ourism earnings is simply a causal relaion and lasly he relaion beween real exchange rae and inernaional ourism earnings is simply a causal relaion as well [3]. Brida and Risso (009) invesigae possible causal relaionships among ourism expendiure, real exchange rae and economic growh using quarerly daa from 986 o 007. The resuls indicae ha economic growh in Chile has been sensible o he expansion of inernaional ourism during he las decades. The increase of his aciviy has produced muliplier effecs over ime. The empirical resuls suppor a ourism-led economic growh [4]. Brida, Barque and Risso (00) invesigae he causal relaions beween ourism growh, relaive prices and economic expansion for he Trenino-Alo Adige, a region of norheas Ialy bordering on Swizerland and Ausria. Johansen co-inegraion analysis shows he exisence of one co-inegraed vecor among real GDP, ourism and relaive prices where he corresponding elasiciies are posiive. Tourism and relaive prices are weakly exogenous o real GDP. A variaion of he Granger Causaliy es developed by Toda and Yamamoo is performed o reveal he unidirecional causaliy from ourism o real GDP. Impulse response analysis shows ha a shock in ourism expendiure produces a fas posiive effec on growh [5]. Kreishan (00) examines he causaliy relaions beween ourism earnings and economic growh (GDP) for Jordan, using annual daa covering he period Developed ime-series echniques are used namely, Augmened Dickey-Fuller (ADF) for uni roo, Johanson and Juselius (JJ) for co-inegraion and Granger causaliy es for causal relaionships. The findings of he sudy show ha here is a posiive relaionship beween ourism developmen and economic developmen in he long-run. Moreover, he Granger causaliy es resuls reveal he presence of unidirecional causaliy from ourism earnings o economic growh. The resuls of his sudy sugges ha governmen should focus on economic policies o promoe inernaional ourism as a poenial source of economic growh in Jordan [6]. These analyses above are conduced on a single counry basis. Some oher sudies focus on he conribuion of ourism o he economic growh on several counries and regions. Fayissa, Nsiah and Tadasse (007) use a panel daa of 4 African counries for he years ha span from 995 o 004 o explore he poenial conribuion of ourism o economic growh and developmen wihin he convenional neoclassical framework. Their resuls show ha receips from he ourism indusry significanly conribue boh o he curren level of GDP and he economic growh of Sub-Saharan African counries as do invesmens in physical and human capial [7]. Lee and Chang (008) apply he new heerogeneous panel co-inegraion echnique o reinvesigae he long-run comovemens and causal relaionships beween ourism 0 ACADEMY PUBLISHER

3 54 JOURNAL OF COMPUTERS, VOL. 7, NO. 9, SEPTEMBER 0 developmen and economic growh for OECD and nonoecd counries (including hose in Asia, Lain America and Sub-Sahara Africa) for he period. On he global scale, afer allowing for he heerogeneous counry effec, a co-inegraed relaionship beween GDP and ourism developmen is subsaniaed. I is also deermined ha ourism developmen has a greaer impac on GDP in non-oecd counries han in OECD counries, and when he variable is ourism receips, he greaes impac is in Sub-Sahara African counries. Addiionally, he real effecive exchange rae has significan effecs on economic growh. Finally, in he long run, he panel causaliy es shows unidirecional causaliy relaionships from ourism developmen o economic growh in OECD counries, bidirecional relaionships in non-oecd counries, bu only weak relaionships in Asia [8]. Fayissa, Nsiah and Tadasse (009) furher use a panel daa of 7 Lain American counries (LACs) for he years ha span from 995 o 004 o invesigae he impac of he ourism indusry on he economic growh and developmen Lain American counries wihin he framework of he convenional neoclassical growh model. Their empirical resuls show ha revenues from he ourism indusry posiively conribue o boh he curren level of GDP and he economic growh of LACs as do invesmens in physical and human capial [9]. Wih he rapid developmen of China s ourism indusry, here are several sudies examine he relaionship beween ourism and economic growh by using China s daa. Wu (003) find ha he developmen of ourism indusry has largely promoed China s economic growh [0]. Yang (006) finds ha domesic ourism has lile pulling effecs on economic growh, bu economic growh had significan driving effecs on domesic ourism []. Boh sudies direcly ake regression analysis on non-saionary variables such as domesic ourism income, inbound ourism income and GDP, hus spurious regression may occur. Chen, Liu and Xu (006) ake a Granger causaliy es on he relaionship beween he developmen of China s ourism indusry and economic growh based on he annual ime series daa from 985 o 003.Their sudy indicae ha he developmen of China s ourism indusry has significanly promoing effecs on China s economic growh, bu China s economic growh has lile promoing effecs on he developmen of China s ourism indusry []. Making use of he daa on China s domesic ourism revenue, inbound ourism revenue and GDP from 985 o 005, Liu and Wu (007) find ha here are long-erm and sable co-inegraion relaionship among domesic ourism, economic growh and inbound ourism. Moreover, hey find ha here are Granger causaliies from economic growh o domesic ourism and inbound ourism [3]. Based on he daa of China s inbound revenue per capial, domesic revenue per capial and GDP per capial from 978 o 007, Wu, Xie and Quan (009) invesigae he causal relaions beween ourism growh and economic expansion for China s economy by using Johansen Co-inegraion es approach and Granger causaliy es. They conclude ha here is a long-erm equilibrium beween domesic ourism growh and economic expansion. Also, hey find ou here is no causal relaionship beween inernaional ourism growh and economic expansion a he naional level [4]. China has implemened sampling survey on domesic ourism since 993. Therefore, he daa of domesic ourism revenue afer 993 is incomparable wih he daa before 993. In addiion, he saisical mehod on inernaional ourism revenue has changed wih he reform in China s foreign exchange managemen sysem, and he daa of inernaional ourism revenue is also incomparable wih previous year. Taking ino accoun ha he qualiy of he sample daa has serious defecs in hese sudies above, conclusions drawn from hese sudies may be wrong. Some researchers have aken noe of ha he daa of he revenue of China s domesic ourism before 993 can no compare wih he daa afer 993. Based on he co-inegraion heory, Zhang and Liu (009) analyze he relaionship beween ourism consumpion of residens and economic growh by using of he annual ime series daa during period from 994 o 006. They draw some conclusions as follows: he ourism consumpion of urban residens has he co-inegraion relaionship wih GDP as well as he added value of he hird indusry [5]. Based on he daa from 993 o 007, Liu and Hao (009) examine wheher here are co-inegraion beween domesic ourism, inbound ourism and economic growh in China. The resuls indicae ha boh domesic ourism and inbound ourism have co-inegraion relaionship wih economic growh [6]. Making use of he daa from 993 o 009, Zhao and Quan (0) examine he correlaiviy beween China s domesic ourism consumpion and economic growh by a VAR economeric model. They find ou ha here is a long-erm equilibrium relaionship beween domesic ourism consumpion and economic growh hrough co-inegraion es, Granger causaliy es, impulse responses, and variance decomposiion. Bu in shor erm, he role of domesic ourism consumpion enforcing economic growh is less han i of economic growh enforcing domesic ourism consumpion. Furhermore, in long erm, he role of domesic ourism consumpion enforcing economic growh is greaer han i of economic growh enforcing domesic ourism consumpion. Finally, heir paper gives a series of suggesion on he iner-reacion beween domesic ourism consumpion and economic growh [7]. However, resuls drawn from hese sudies are all unreliable due o he sample size being very small. On he whole, empirical sudies on he relaionship beween ourism revenue and economic growh or more specifically he ourism-led growh hypohesis have been exensively research. Mos sudies indicae ha here is co-inegraion relaionship beween ourism and economic growh. However, he direcion of he causaliy remains as ye an unsolved conundrum. Knowing he direcion of causaliy is no jus for undersanding he process, bu i is also vial for designing of appropriae policy. Therefore, examine he validiy of ourism-led 0 ACADEMY PUBLISHER

4 JOURNAL OF COMPUTERS, VOL. 7, NO. 9, SEPTEMBER 0 55 growh hypohesis or vice versa has become a pivoal issue for economiss as well as he policymakers. In his paper, we employ he annual ime series daa on China s economic growh and China s domesic ouris arrivals raher han domesic ourism revenue during period from 984 o 009, and examine weher here is long erm equilibrium relaionship (namely co-inegraion relaionship) beween he developmen of China s domesic ourism and China s economic growh based on co-inegraion heory. In addiion, his paper consrucs an error correcion model o analysis he shor erm disequilibrium relaionship beween he developmen of China s domesic ourism and economic growh. Finally, we examine wheher here is causaliy beween hem by performing Granger cause es. III. METHODOLOGY Classical regression analysis is based on he hypohesis ha he ime series daa is saionary. However, much ime series daa is non-saionary. Because he nonsaionary ime series don have limied variance and i can accord wih Gauss-Markov Theorem, he Ordinary Leas-Squares (OLS) Esimaors are inconsisen and hen he spurious regression phenomenon may occur [8], hus he incorrec causaliy can be drawn [9]. Co-inegraion heory in dynamic economerics analysis can overcame he deficiency of mehod menioned above and deal wih nonsaionary ime series effecively. The general sep of co-inegraion analysis is as following: The firs sep, we perform a uni roo es developed by Dickey and Fuller (979, 98) o invesigae he saionariy of series wheher hey are saionary [0, ]. If hey are non-saionary, we should inroduce co-inegraion heory o analysis he relaionship beween hem. On he basis of co-inegraion es, we employ Granger causaliy es o examine wheher here is causal relaionship beween hese variables. Granger (988) argues ha here is a one-way Granger cause a leas if hese variables are co-inegraion [9]. For ime series x, esablish he following model: x = γ x + ε or Δ x = δ x + ε. () where Δ denoes he firs difference operaor and denoes ime period. The residuals ε are assumed o be normally disribued, serially uncorrelaed, and whie noise. δ is defined as δ = γ. Ifδ equals o zero, x is nonsaionary. Tha is o say here is a uni roo. Consruc saisic δ δ / s( δ ) =. () which has a DF (Dickey-Fuller) disribuion. Through esimaing model (), we can arrive a he value of δ. If he absolue value of δ is larger han he absolue value of criical value a a given significan level, hen he hypohesis ha he ime series is nonsaionary will be rejeced. This is DF es (Dickey-Fuller es), also called uni roo es. Because we can no ensure ha ε is whie noise in DF es, he esimaed value of δ may be biased. Dickey and Fuller augmened DF es in 979 and 980, and form augmened DF es, namely ADF es []. ADF es and DF es have same principle. The general form of ADF es is as following: p = β δ + λ iδx i i= Δ x a+ + x + ε. (3) Supposing ha a series is nonsaionary bu is firs-order difference is saionary, hen we call his series firs-order inegraion, denoed by I (). If a series is saionary afer d-order difference, hen he series can be called d-order inegraion, denoed by I( d ). Supposing ha series x and y are boh d-order a = ( a, a ) makes inegraion series, if here is a vecor z = ay + ax be ( d b) -order inegraion, ha is o say z~ I( d b), where d b 0. Then series x and y can be called ( db, ) co-inegraion, denoed by x, y~ CI( d, b), a is he co-inegraion vecor. Two variables can be co-inegraion on condiion ha hey are boh inegraion wih same order. If series x and y are all nonsaionary, bu hey are all d-order inegraion, hen we can judge wheher and y are co-inegraion hrough examining wheher he residual μ in model (4) is saionary. If μ is saionary, hen we can consider wheher here is a co-inegraion relaionship beween x and y : 0. x y = b + bx + μ (4) The meaning of co-inegraion analysis is ha i can examine wheher here is a long-erm equilibrium relaionship beween variables. If wo variables are co-inegraion, hey will no separae far from each oher in long erm. An impulse can merely give rise hem o be apar from each oher in shor erm. In long erm, hey will resume equilibrium auomaically. Engel-Granger wo-sep es (987) can be used o verify wheher variables are co-inegraion [3]. Co-inegraion es can examine wheher here is a long-erm equilibrium relaionship beween variables. However, i can no reveal wheher here is causaliy beween hem. The exisence of co-inegraion implies he exisence of Granger causaliy a leas in one direcion (Granger, 988). Granger causaliy es provides a good mehod o deal wih such problem. We can consider ha variable X is variable Y s Granger cause if he lagged erm of X included can significanly improve he accuracy 0 ACADEMY PUBLISHER

5 56 JOURNAL OF COMPUTERS, VOL. 7, NO. 9, SEPTEMBER 0 of he prediced variable Y. Consruc he following model: where m y =a+ i= i x i n α + j= β + u. (5) y i j u denoes random error which represens omied facors lef ou by he deerminisic par of he model; α, β are coefficien. Null hypohesis ha H : α = α = = α = 0( j =,, n) means ha X 0 j, is no Ys Granger cause. If we can no refuse he null hypohesis, hen n y =a+ j= β + u. (6) y i j Le RSS and RSS denoe residual sum of squares in model (5) and model (6). Thus, he raio ( RSS RSS ) / n F = (7) RSS/( T m n ) has an F disribuion wih n and T m n degrees of freedom. Where T denoes sample size; m, n is he lagged lengh of Y and X, hey are boh deermined on he rule of AIC (Akaike Informaion Crierion) or SC (Schwarz Crierion). IV. EMPIRICAL RESULTS A. Variables Definiion and Daa Specificaion In his sudy, we employ he following wo indexes o measure he developmen of China s domesic ourism indusry and China s economic growh. () The sign GDP denoes China s GDP (he uni is 00 billion Yuan), which is used for reflecing he aggregae macro-economy, and is change reflecs economic growh. The daa of China s GDP is adjused by consan prices (978=00) o eliminae he effec of inflaion. () The sign DTA denoes China s domesic ouris arrivals (he uni is 00 million person imes), which is considered as a proxy variable of he developmen of China s domesic ourism. Because he logarihmic ransformaion does no influence he co-inegraion relaionship beween he variables, China s GDP and domesic ourism arrivals are boh ransformed ino naural logarihm form o avoid he obvious problems of heeroscedasiciy. The signs lngdp and lndta respecively denoe China s GDP and domesic ouris arrivals afer he ransformaion of naural logarihm. Because he daa of China s domesic ouris arrivals before 984 is unavailable, his paper covers he sample period from 984 o 009. The daase are colleced from The Yearbook of China Saisics and The Yearbook of China Tourism Saisics. The resuls of descripive saisical analysis on lngdp and lndta are repored in ab.. The scaer diagram (fig.) of lngdp and lndta describe direcly he relaionship beween China s domesic ourism and economic growh. We can find ou ha boh domesic ouris arrivals and GDP has been TABLE II. DESCRIPTIVE STATISTICS OF VARIABLES Variable Obs Mean Sd. Dev. Min Max GDP DTA increasing since 984 wih an excepion of 989. I seems ha China s domesic ourism and economic growh keep an appropriaely same rend of evoluion on he whole. However, furher sudy is necessary o examine wheher here is a long-erm and sable equilibrium relaionship (or co-inegraion relaionship) beween he developmen of China s domesic ourism and China s economic growh. B. Uni Roo Tes The co-inegraion relaionship beween variables is lngdp lndta Figure.Evoluion rend of lngdp and lndta based on ha hey have same orders of inegraion. So, we firsly es he saionary of he wo series of lngdp and lndta by uni roo es. This paper ess he saionariy of lngdp and lndta as well as heir orders of inegraion by ADF (Augmen Dickey-Fuller) es. The lagged order is deermined on he rule of AIC. This paper employs GPE package o perform ADF es on he wo series of lngdp and lndta (he resuls of ADF es are repored in ab.3). The resuls from uni roo es show ha lngdp and lndta are boh non-saionary because boh ADF value exceed he criical value a he significan level of 0 percen. Moreover, each ADF value of heir firs-order difference is less han he criical value a he significan level of 5 percen, which shows ha heir firs-order difference are boh saionary, ha is o say ha lngdp and lndta are boh firs-order inegraion, namely lngdp and lndta ~ I (). Thus, we can perform co-inegraion analysis on he relaionship beween China s domesic ourism and economic growh. C. Co-inegraion Tes The resuls from uni roo es indicae ha lngdp and lndta are boh firs-order inegraion series. Then, we will examine wheher here is a co-inegraion relaionship beween China s domesic ourism and economic growh. We employ he mehod of Engel-Granger wo-sep es o examine wheher here is 0 ACADEMY PUBLISHER

6 JOURNAL OF COMPUTERS, VOL. 7, NO. 9, SEPTEMBER 0 57 Variable lngdp lndta lngdp lndta TABLE III. RESULTS OF UNIT UOOT TEST ON VARIABLES (ADF TEST) es ype (c,, p) (c,,) (c,,) (c,0,) (c,0,0) ADF value criical value % 5% 0% Noe: () es ype (c,, p), where c denoes drif erm, denoes ime rend, p denoes lag lengh ;( ) denoes he firs difference operaor. a co-inegraion relaionship beween lngdp and lndta [8]. The firs sep, performing OLS regression on lngdp and lndta, we have ln GDP = ln DTA. (8) (53.66) (38.0) R = DW = 0.76 DW=0.76 indicaes ha here is firs-order auocorrelaion in model (8). By inroducing lagged erms ino model (8), we will obain a dynamic disribued lag model (model 9). ln GDP = ln DTA 0.95ln DTA +.063ln GDP. (9) (-0.768) (3.390) (-3.965) (4.94) R = LM = 0.75 LM = 5.97 DW = SSE = 0.09 ARCH =.73 The resuls from LM es on serial correlaion show ha here is no auocorrelaion in model (9). The resuls of ARCH es indicae ha here is no heeroscedasiciy. Thus, Model (9) can be considered o be he long-erm and sable equilibrium relaionship (co-inegraon relaionship) beween China s domesic ourism and economic growh. The second sep, we will perform uni roo es on residual series e in model (9) o es wheher e is saionary. The resuls are repored in ab.4. The ADF value is less han he criical value a he significan level of one percen, as shows he hypohesis ha e is a saionary series can no be rejeced. Therefore, we can consider ha he residual series e in model (9) is a saionary series, ha is o say e ~ I (0). Furhermore, he hypohesis ha lngdp and lndta are co-inegraion can no be rejeced. Tha is o say, lngdp and lndta are (,) co-inegraion. Model (9) is really he long-erm and sable equilibrium relaionship beween China s domesic ourism and economic growh. The long-erm elasiciy of lngdp changing o lndta is 0.80 (his value is arrived a hrough calculaing he expression of [( ) / (.063)] ), which indicaes China s GDP will increase 0.80 percen if China s domesic ouris arrivals increase one percen in he long erm. D. Error Correcion Model Error correcion model (ECM) is an economeric model wih specific form. The general form of ECM model is pu forward by Davidson, Hendry, Srba and Yeo in 978, and which can be called DHSY model [3]. If wo variables are co-inegraion, he shor-erm disequilibrium relaionship beween hem can be represened wih an ECM model (Engle & Granger, 987). Employing OLS mehod, we can obain he following TABLE IV. RESULTS OF UNIT ROOT TEST ON RESIDUAL SERIES (ADF TEST) Variable Tes ype(c,, p) ADF value e ECM model (0) o examine he shor-erm disequilibrium relaionship beween China s domesic ourism and economic growh. lngdp = 0.9Δln DTA 0.80 Δ ln DTA Δln GDP (4.89) (-3.767) (7.754) 0.436Δln GDP.05ecm. (0) (-3.38) (-4.33) DW = SSE = 0.03 R = LM = ARCH = 0.63 where ecm (error correcion erm) can be represened by he formula: ecm = ln GDP 0.44ln DTA ln DTA.063ln GDP Criical value a percen level (0,0,0) () The releven saisics indicae ha he error correcion model can pass significan es. The ECM model reveals how he equilibrium error impacs GDP in he shor-erm. The coefficien of he ecm erm equals -.05 (less han zero), which is in accordence wih he reverse correcion mechanism. The shor-erm elasiciy of lny changing o lnr equals o 0.9, which indicaes China s GDP will increase 0.9 percen if China s domesic ouris arrivals increase one percen in he shor-erm. E. Granger Causaliy Tes The resuls from co-inegraion es show ha here is a long-erm and sable equilibrium relaionship beween China s domesic ourism and economic growh. The exisence of long-erm relaionships beween China s domesic ourism developmen and economic growh signifies ha boh variables are causally relaed a leas in one direcion. However, does China s domesic ourism developmen resul in economic growh or vice versa? Then, we es wheher here is a causaliy beween China s domesic ourism and economic growh based on he mehod of Granger causaliy es (he resuls of his es are repored in ab.5). 0 ACADEMY PUBLISHER

7 58 JOURNAL OF COMPUTERS, VOL. 7, NO. 9, SEPTEMBER 0 TABLE V. RESULTS OF GRANGER CAUSALITY TEST Lags Null Hypohesis F-Saisic Probabiliy lndta does no Granger Cause lngdp lngdp does no Granger Cause lndta The null hypohesis ha lndta does no Granger Cause lngdp can be rejeced a 5 percen significan level. The null hypohesis ha lngdp does no Granger Cause lndta can be rejeced a percen significan level. These resuls indicae ha here is a bidirecioanl Granger causaliy beween he developmen of China s domesic ourism and economic growh. The developmen of China s domesic ourism is he Granger cause of economic growh. Meanwhile, China s economic growh is also he Granger cause of he developmen of China s domesic ourism. Tha is o say, he developmen of China s domesic ourism can pull China s economic growh and China s economic growh can promoe he developmen of China s domesic ourism. V. CONCLUDING REMARKS The main objec of his sudy is o invesigae he real relaionships beween China s domesic ourism and economic growh. This paper arrives a following hree conclusions by employing co-inegraion heory and Granger causaliy es. Firs of all, we find ou ha here is a long-erm and sable equilibrium relaionship (co-inegraion relaionship) beween he developmen of China s domesic ourism and economic growh. China s GDP will increase 0.80 percen if China s domesic ouris arrivals increase one percen in long erm. Secondly, here is a shor-erm disequilibrium relaionship beween he developmen of China s domesic ourism and economic growh. China s GDP will increase 0.9 percen if China s domesic ouris arrivals increase one percen in shor erm. From he ECM model, we can find ou ha here is an adjusmen mechanism from shor erm o long erm in he relaionship beween he developmen of China s domesic ourism and economic growh. Thirdly, here is a bidirecional Granger causaliy beween he developmen of China s domesic ourism and economic growh. The developmen of China s domesic ourism has significanly conribued o China s economic growh. Meanwhile, China s economic growh has evidenly promoed he developmen of China s domesic ourism. Policy implicaion which may be drawn from his sudy is ha China can improve is economic growh performance, no only by invesing on he radiional sources of growh such as invesmen in physical and human capial and rade, bu also by sraegically harnessing he conribuion he ourism indusry and improving heir governance performance. Over he pas decades of years, many developing and developed counries have considered ourism as an opion for susainable developmen of heir naions. Tourism has emerged from being a relaively small-scale aciviy ino one of he larges indusries in he world and a fases growing global economic secor of he world s economy from he 960s onwards. The imporance of ourism as a conribuor o economic growh is so widely acceped ha year afer year hroughou he world a massive invesmen coninues o pour in is developmen. A presen, China s domesic ourism marke has become he larges in he world. China s domesic ourism has been enering a popular sage. Toal revenue of China s ourism indusry is abou.57 rillion Yuan in 00. Thereino, he revenue from domesic ourism indusry is.6 rillion Yuan and accouns for 80.5% of he oal revenue of China s ourism indusry. The developmen of China s domesic ourism indusry can increase China s domesic demand, promoe he developmen of relaed indusries, drive he adjusmen of indusrial srucure, and promoe he ransformaion of economic growh mode. China s ourism indusry has played an imporan role in mainaining a long-erm China s economic growh from reforming and opening, expanding China s domesic demand and adjusing China s indusrial srucure since he inernaional financial crisis. The prosperiy of China s domesic ourism indusry has laid a sable groundwork for China s ourism indusry being a growh poin in China s economy. As well as, he susaining and sable growh of China s economy can provide a large amoun of capial for ourism infrasrucure consrucion in favor of he developmen of China s domesic ourism. Wih he coninuous, rapid and sable developmen of China s economy, income of residen rising seadily, leisure ime of residen increasing sep by sep, popular and diversifying demand for ourism producs provide a favorable opporuniy o he developmen of China s domesic ourism indusry. The susaining and healhy developmen of China s economy will keep on driving he developmen of China s domesic ourism indusry. ACKNOWLEDGMENT This work was suppored in par by susenaion fund o youh college eachers in Anhui province, P.R.China (Gran No.008jqw059zd). We would like o acknowledge Zhou Mo and Wang Yongpei (hey are boh economic PhD. candidae of Renming Universiy of China, Beijing, P.R.China) for helpful remarks and suggesions on he original ediion of his paper. We also hank he ediors and anonymous referees of his journal for consrucive commens on he manuscrip. Errors and omissions, if any, are sricly our own. REFERENCES [] C-O Oh, The Conribuion of ourism developmen o economic growh in he Korean economy, Tourism Managemen, vol. 6, No., pp , February 005. [] J. Balaguer and C-J. Manuel, Tourism as a long-run economic growh facor: he Spanish case, Applied Economics, vol. 34, No. 7, pp , May 00. [3] N. Drisakis, Tourism as a Long-run Economic Growh Facor: An Empirical Invesigaion for Greece, Tourism Economics, vol. 0, No. 3, pp , Sepember ACADEMY PUBLISHER

8 JOURNAL OF COMPUTERS, VOL. 7, NO. 9, SEPTEMBER 0 59 [4] J. G. Brida and W. A. Risso, Tourism as a facor of long-run economic growh: an empirical analysis for Chile, European Journal of Tourism Research, vol., No., pp.78-85, Ocober 009. [5] J. G. Brida, A. Barque, and W. A. Risso, Causaliy beween economic growh and ourism expansion: empirical evidence from Trenino-Alo Adige, An Inernaional Mulidisciplinary Journal of Tourism, vol. 5, No., pp , Auumn 00. [6] F. M. M. Kreishan, Tourism and economic growh: The case of Jordan, European Journal of Social. Sciences, vol. 5, No., pp. 9-34, Augus, 00. [7] B. Fayissa, C. Nsiah, and B. Tadasse, The impac of ourism on economic growh and developmen in Africa, Middle Tennessee Sae Universiy, Deparmen of Economics and Finance, Working Papers, No. 0076, 007. [8] C-C. Lee and C-P. Chang, Tourism developmen and economic growh: a closer look a panels, Tourism Managemen. Vol. 9, No., pp. 80-9, February 008. [9] B. Fayissa, C. Nsiah, and B. Tadasse, Tourism and Economic Growh in Lain American Counries (LAC): Furher Empirical Evidence, Middle Tennessee Sae Universiy, Deparmen of Economics and Finance, Working Papers, No. 0076, 009. [0] Guoxin Wu, Analysis of coherency beween ourism developmen and economic growh in China, Journal of Shanghai Insiue of Technology, vol. 3, No. 4, pp. 38-4, December 003. [] Zhiyong Yang, An Empirical analysis on he ineracion effec beween ourism consume and economic growh, Journal of Inner Mongolia Finance and Economics College, vol. 4, No., pp. 7-30, April 006. [] Youlong Chen, Peilin Liu and Chaojun Xu, Research on causaliy beween developmen of ourism and economic growh in China, Journal of Hengyang Normal Universiy, vol. 7, No., pp , February 006. [3] Siwei Liu and Zhongcai Wu, An Empirical Sudy on Tourism and Economic Growh of China, Sysems Engineering, vol. 5, No. 9, pp , Sepember 007. [4] Chunyou Wu, F.Y. Xie and Hua Quan, Conribuion of ourism developmen o China s economic growh, Science-Technology and Managemen, vol., No. 6, pp. 8-0, November 009. [5] Lifeng Zhang and Binde Liu, Analysis on influence of ourism consumpion on economic growh in China, Technology Economics, vol. 8, No. 5, pp. 8-85, May 009. [6] Yinhui Liu, Suo Hao, Comparaive analysis on he effec of domesic ourism and inbound ourism on economic growh in China, Saisics and Decision, vol. 5, No. 4, pp. 0-, July 009. [7] Lei Zhao and Hua Quan, An Empirical sudy on relaion beween domesic ourism consumpion and economic growh in China, On Economic Problems, vol. 33, No. 4, pp. 3-38, April 0. [8] C. W. J. Granger and P. Newbold, Spurious regressions in economerics, Journal of Economerics, Vol., No., pp. -0, July 974. [9] Jingshui Sun, The Tuorial o Economerics (nd Ediion). Beijing, China: Tsinghua Universiy Press, 009. [0] D. A. Dickey and W. A. Fuller, Disribuion of he esimaors for auoregressive ime series wih a uni roo, Journal of he American Saisical Associaion, vol. 74, No. 366, pp , June 979. [] D. A. Dickey and W. A. Fuller, Likelihood raio saisics for auoregressive ime series wih a uni roo, Economerica, vol. 49, No. 4, pp , June 98. [] Hayashi Fumio, Economerics. Shanghai, China: Shanghai Universiy of Finance and economics Press, 005. [3] Tiemei Gao. Mehods of Economeric Analysis and Consurcing Model (nd Ediion). Beijing, China: Tsinghua Universiy Press, 009. Wang Liangju is an economic PhD. Candidae of Renming Universiy of China, Beijing, P. R. China. He earned Maser s degree of managemen in Anhui Universiy of Finance and Economics, Bengbu, P.R.China in January 005. His main field of sudy is marke heory and indusry policy, he effec of ourism on economy and New Empirical Indusrial Organizaion (NEIO). He works in School of Business Adminisraion, Anhui Universiy of Finance and Economics, P.R.China as a lecure from November 006. He insrucs courses such as ourism planning and developing, service managemen and ourism markeing planning. Currenly, his research ineres is agglomeraion economy and economic growh, he effec of ourism on economy. Zhang Huihui earned Bachelor s degree of managemen in Anhui Universiy of Finance and Economics, Bengbu, P.R.China in June 004. Her field of sudy is he heory and pracice of accouning. Now, she is a graduae suden in School of Accouning, Anhui Universiy of Finance and Economics, P.R.China majoring in accouning. Her research ineres is empirical accouning. Li Wanlian earned Docor s degree of ecology in Eas China Normal Universiy, Shanghai, and P.R.China in June 005. Her field of sudy is ourism economic effec. She works in School of Business Adminisraion, Anhui Universiy of Finance and Economics, P.R.China as an associae professor from Sepember 008. She is a uor for graduae of ourism managemen. She insrucs courses of ourism planning and developing and ourism psychology. Currenly, her research ineres is he effec of ourism on economy and he behavior of ourism cusomer. 0 ACADEMY PUBLISHER