The Tourism‐Led Economic Growth Hypothesis in the Euro Area: Do Asymmetries and Structural Breaks Matter?

ABSTRACT This paper examines the validity of the tourism‐led economic growth hypothesis for the Euro Area economies. We employ both linear and nonlinear Autoregressive Distributed Lag (ARDL) cointegration approaches to examine the symmetric and asymmetric effects of tourism on economic growth. Furthermore, we control for the presence of structural breaks in the time series, which account for the recent financial and debt crises in the Euro Area. The results support the positive impact of tourism on economic growth for most of the Euro Area economies and are robust to alternative tourism measures. The findings indicate that an asymmetric impact exists both in the long and the short run. Positive and negative shocks in tourism and the real exchange rate result in significantly different effects, both in terms of sign and magnitude, on economic growth.