On the tourism-led growth hypothesis in the UAE: a bootstrap approach with leveraged adjustments

Abstract

The emerging market of the UAE has chosen attracting international tourism as one of the main strategies during the recent decades in order to diversify its economy. The main goal has been to achieve sustainable growth without overreliance on the volatile oil sector. This article investigates the impact of tourism on economic performance in the UAE by using bootstrapped causality tests with leverage adjustments. The results show that the tourism-led growth hypothesis can be supported empirically. Thus, the conducted policy by the UAE government to promote international tourism for achieving economic growth might be considered as a sustainable strategy.

KEYWORDS:

• Tourism
• economic growth
• causality test
• bootstrapping
• the UAE

JEL CLASSIFICATION:

• E10
• F43
• C32

Notes

¹ See the link: http://www.euromonitor.com/united-arab-emirates/country-factfile.

² For a recent and comprehensive literature review on the tourism-led growth hypothesis, see Brida, Cortes-Jimenez, and Manuela Pulina (2015).

³ The optimal lag order p is selected by minimizing an information criterion suggested by Hatemi-J (2003, 2008).

⁴ A few missing observations were approximated by fitting a trend model.

⁵ The details on these diagnostic tests are not presented but they are available on request. The multivariate ARCH test was implemented by using the statistical software component produced by Hacker and Hatemi-J (2009).

Additional information

Funding

This article is funded by the UAE national research fund via the UPAR program of the UAE University.