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Exploring the linear and non-linear effect of tourism on economic growth in Cabo Verde: Evidence from ardl and nardl models
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Tourism plays an important role in the economic and social development of Cabo Verde. The purpose of this thesis is to investigate the linear and non-linear effects of inbound tourism on economic growth in Cabo Verde and, through this analysis, draw conclusions regarding the Tourism-Led Economic Growth hypothesis. We achieve this by relying on bonds test for cointegration and the Toda-Yamamoto approach to Granger Non-causality test through the Linear Autoregressive Distributed Lags model and Non-Linear Autoregressive Distributed Lags model. Using quarterly data over the period of first quarter of 2007 and second quarter of 2023, visitor arrival and real GDP as respective proxy for international tourism and economic growth, we examine the long-run association and report the elasticity coefficient of tourism and causality nexus, accordingly. Using Bai-Peron test for multiple breakpoints, we note three structural break periods (third quarter of 2011, third quarter of 2016 and first quarter of 2019) in the output series. In the autoregressive distributed lags model the break periods, third quarter of 2016 and first quarter of 2019, showed statistically significant estimates and, hence, were retained in the final estimation. Subsequently, the regression results show the two series are cointegrated. The short-run elasticity coefficient of tourism is estimated to be 0.067 and the long-run is 0.10, meaning that a 1% increase in visitor arrival (tourism) is expected to increase real GDP by 0.067% and 0.10% in the short-run and the long-run, respectively. From the linear perspective, a bidirectional causality between tourism and economic growth is noted for Cabo Verde which indicates that tourism expansion and output mutually reinforce each other. Expanding the analysis to non-linear perspectives, we conclude that although there is no evidence of long-run asymmetric effects of tourism expansion on economic growth in Cabo Verde, there is evidence of this asymmetry in the short run, indicating that the effect of tourism on economic growth is different for positive changes compared to negative changes. In response, socio-economic policies should prioritize expansive, inclusive, and income-generating tourism development projects, expected to yield significant feedback effects. These development strategies should integrate tourism into broader national development plans, emphasizing inter-sectoral linkages. Furthermore, expanding the issuing market should be a crucial endeavor for the sustainable and diversified advancement of tourism.
Descrição
Dissertation presented as the partial requirement for obtaining a Master's degree in Statistics and Information Management, specialization in Information Analysis and Management
Palavras-chave
Autoregressive Distributed Lags model Non-Linear Autoregressive Distributed Lags model Asymmetric effects Bonds test for cointegration Toda-Yamamoto approach Granger non-causality test SDG 8 - Decent work and economic growth SDG 9 - Industry, innovation and infrastructure