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Keywords:

  • Aruba;
  • tourism development;
  • economic growth;
  • co-integration;
  • Granger causality

ABSTRACT

This study examines the long-run relationship between tourism development and economic growth in a small island destination. Determining whether the nature of the relationship is unidirectional or bidirectional provides insightful information as to policies to be implemented. This information is crucial in a resource-poor environment, such as a small island destination. The study employs an econometric methodology consisting of unit root testing, co-integration analysis, vector error correction modeling and Granger causality testing. Results confirm the reciprocal hypothesis. The policy implication is that resource allocation supporting both the tourism and tourism-related industries could benefit both tourism development and economic growth. Copyright © 2013 John Wiley & Sons, Ltd.