Analyzing the significance of tourism on Sri Lankan economy; an econometric analysis

Abstract

In countries like Maldives, Malaysia, Singapore and Spain, tourism and related recreation activities play a significant role in the generation of income / foreign exchange and provision of employment opportunities. In fact, in the global context this industry is identified as the single largest economic contributor. Moreover, tourism plays a crucial role in the attainment of macroeconomic stability. Besides, the political stability of a country has a major impact on its tourism industry. According to the preceding view, this paper aims at analysing empirically the significance of tourism in the Sri Lankan economy from 1970 to 2008. The relationship will be analyzed based on a time series approach. The study will endeavour to estimate the relationship between economic performance and tourism revenue, subject to main macroeconomic variables and political stability of the country. With respect to policy implications, the study recommends that the role of tourism could be highly emphasized in the sustainable economic development with a stable political environment.