The Nexus between Tourism Sector Revenue and Economic Growth: Insights from Saudi Arabia

Abstract

The study aims to demonstrate the impact of growth in tourism revenues in achieving economic growth in the Saudi economy. The study relied on the hypothesis that the growth of real tourism revenues causes real economic growth, and that real economic growth causes real tourism revenues growth. A standard model was used to test this causal relationship, based on the joint integration method and using the error correction model (VECM). The results of the test model concluded that the causal relationship is unidirectional from real GDP growth to real tourism revenues in the short and long term. The causal relationship is unidirectional in the long term only from labour supply to real GDP, meaning that labour supply causes real GDP in the long term only. The causal relationship was unidirectional from real GDP growth to real investment spending.