Abstract:
Tourism-led growth Hypothesis has been a key policy put forward by pro-tourist policy makers .
This has no exceptions in the case of Sri Lanka. In the recent past the tourism industry has
performed significantly which was reflected in the growth of Foreign Tourist Arrivals and
Foreign Earnings from Tourists. On this backdrop this study was undertaken to investigate the
existence of the Tourism-led growth Hypothesis in the context of Sri Lanka. We used annual
data from 1995 to 2016 to model the causal relationship between tourism and economic growth
and thereby capture the long-term relationship using cointegration. The results of the study
suggest a significant causal relationship from Foreign Tourist Arrivals and Foreign Earnings
from Tourists to the Real Gross Domestic Product. This major finding inspired us to appraise
the feedback from tourists as per the second objective of the study. The evaluation provided
insights to areas that needs contemplation and avenues for advancements. It can be argued that
economic policies should be directed to improving the tourism industry to achieve a higher
economic growth.
