| Summary: | This study uses quarterly time series for the period from 1995 to 2015
to assess the temporal causal link between tourism and economic
growth based on the hypothesis according to which tourism
development precedes economic growth. It adopts a disaggregated
approach to study the effects of both domestic tourists and foreign
tourists on economic growth. Seasonally adjusted tourist arrivals are
used to represent tourism activity. This study employs time series
cointegration methods that are capable of accommodating structural
breaks. The results show that the Portuguese case supports the
tourism-led growth hypothesis. There is evidence of a long run
cointegration relationship between the real gross domestic product
and arrivals at tourist’s accommodation establishments of both
domestic tourists and foreign tourists. Long run unidirectional Granger
causality exists running from domestic tourists to real gross domestic
product, but not vice versa. The findings indicate that domestic
tourism promotes economic growth. The main policy implication is
that policy makers should contribute to tourism development and
encourage tourism opportunities in domestic markets by targeting not
only foreign tourists, but also domestic tourists to ensure the longterm success and strategic planning of the tourism sector in Portugal.
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