Abstract:
This study investigates the causal relations between tourism development and economic growth for
the Sri Lankan economy by using Engle and Granger two-phase approach and a bivariate Vector
Autoregression (VAR) model. Two standard results arise from this study. First, the results of a
cointegration test designate that there is no long-run equilibrium association between two sequence.
Next, the results of Granger causality test suggest the uni-directional causal relationship of economicdetermined tourism development. The hypothesis of tourism-directed economic development is not
detained in the Sri Lankan economy. This consequence is sustained by analyzing the sensitivity of
causality test under distinct lag selections beside with the optimal lag.
