Tourism and growth in Lebanon: new evidence from bootstrap simulation and rolling causality approaches

A multivariate model incorporating tourist arrivals, real output, and the real exchange rate is estimated to study the causal relationship between tourism and economic growth in Lebanon. This study covers the monthly data from January 1995 to December 2011. The Granger causality between the variables of interest is determined using the TYDL bootstrap causality approach. Then, we apply the Granger causality with rolling regression technique to evaluate the stability of the tourism-led growth hypothesis in Lebanon. We find that the tourism-led growth hypothesis is supported empirically in the case of the Lebanese economy. Meanwhile, we also find some evidences of uni-directional Granger causality running from the real exchange rate to tourism and economic growth in Lebanon. Therefore, tourism can be used a policy instrument to stimulate long-term economic growth in Lebanon.