Tourism expansion and economic growth in Tanzania: A causality analysis

Abstract

After the economic liberalization in mid-2000, Tanzania has assumed that tourism growth spars economic growth due to the consistent significant contribution of tourism sector to the country s annual income. However, there are limited empirical studies that investigated tourism-economic growth relationship in Tanzania. This study aims to investigate an empirical insight into the actual nature of tourism-economic growth in Tanzania by applying the Granger causality and Wald test methods where annual time series data on international tourism receipt, real Gross Domestic Product, and real effective exchange rate over the period 1989–2018 are used. Further, the Impulse Response Function approach is utilized to provide insight into the qualitative nature of the relationships and the length of time necessary for the causal effect to take place. The findings confirm a unidirectional causality from tourism development to economic growth. The study concludes that Tanzania ought to focus on economic strategies that encourage sustainable tourism development as a feasible source of economic growth.