Tourism and Economic Growth in Jordan: Evidence from Linear and Nonlinear Frameworks

Abstract

This study investigates cointegration and causal effects between tourism and economic growth in Jordan. We use quarterly data from 1998Q1 to 2015Q4 on real GDP and real international tourism receipts. Two empirical approaches are employed; Engle and Granger (1987) linear cointegration framework, and the nonlinear framework of Enders and Siklos (2001) cointegration test, in addition to Diks and Panchenko (2006) causality test. Empirical findings reveal the presence of a positive long-run relationship between tourism and economic growth. According to the linear approach there is a unidirectional causality from tourism to growth, thus, supporting the tourism-led growth hypothesis. Whereas, the nonlinear method, which seems to give more appropriate results, suggests a bidirectional causality, hence, confirming the feedback hypothesis that economic growth and tourism reinforce each other.Keywords: Tourism Receipts, Economic Growth, Linear and Nonlinear Frameworks, Jordan.JEL Classifications: L83, C33, F43, O50