Small sample evidence on the tourism-led growth hypothesis in Lebanon

This paper investigates the contribution of tourism to economic growth in Lebanon for the time period of 1995-2010. The presence of long-run and causal relationships is investigated applying the bounds testing approach to cointegration and Granger causality tests. Because of the small sample (T = 16), econometric approaches and critical values used for testing receive special attention. Additionally, a number of diagnostic tests are utilised to ensure that the model is suitable and correct. Interestingly, our results reveal that tourism and economic growth are cointegrated. The Granger causality test indicates that the tourism-led growth hypothesis is valid for Lebanon. Therefore, policy initiatives promoting tourism ought to be further developed and implemented to stimulate economic growth and development for the economy of Lebanon.