Relationship among tourism, FDI, and economic growth in Bangladesh

The tourism sector has grown to be the largest industry in the world, providing jobs to national and local economies. The tourism sector and foreign direct investment are expanding with time, but more research is needed to determine how these developments affect economic growth. This paper attempt to investigate the impact of tourist receipts, tourism spending, and FDI on Bangladesh's economic growth utilizing yearly data from 1998 to 2019 by using Johansen Cointegration Approach, Vector Error Correction Model and Granger Causality test. The present study focuses on long-term or short-term effects of tourism receipts, tourism expenditures, and FDI on economic growth in Bangladesh which have been ignored in the prior studies. The Johansen Cointegration Approach is a time series analysis technique that is used to identify the long-run cointegration of the variables. Vector Error Correction Model (VECM) is also applied to investigate the long and short-run relationships between variables. The outcome of the Johansen cointegration demonstrates that in the long run, international tourism receipts, tourism expenditures and FDI have a positive impact on economic growth. The findings of the VECM demonstrate the existence of a long-term causal nexus running from tourism receipts, tourism expenditures, and FDI to economic growth. In the short term, tourism expenditures positively related to economic growth while FDI negatively correlated to economic growth in Bangladesh. The Granger Causality test findings show that international tourism receipts Granger cause economic growth and there is a unidirectional causal linkage from tourism receipts (TR) to tourism expenditures. The findings also indicate a bi-directional causal link between tourism expenditures (TE) and economic growth (GDPG). Therefore, the study recommends that the government should evaluate the importance and sensitivity of international tourism and FDI in order to boost economic growth.