Vol. 3, Issue 2 (2017)
Analysis of cointegration and causality test for tourism and trade in India
Author(s): Treemurutulu B
Abstract: This paper tries to investigate the long term and short term casual relationship between tourism and trade in India. This study uses econometric model to identify long term relation and short term relations that are measured through Johansen Cointegration Test and Granger Causality Test. The result of the co-integration test proves that there is significant long term relationship between tourism and trade. The short-term relationship test confirms that there exist bi-directional relationship between tourism and trade. The findings of the study indicate that there are two-way causal effects (bi-directional causalities) of tourist receipts influence on exports and import as well as trade balance in India. Therefore tourism shows stronger ability to predict subsequent and trade practices in India. Overall, future economic policy should focus more on tourism trade in order to generate more foreign exchange earnings for the better economic condition in India.