LAUSR

PurposeThe purpose of this study is to investigate the causal linkages between tourism and economic growth in the USA and determine how they respond to shocks in the system.Design/methodology/approachThe study uses a variety of time series procedures, including the bounds test, Granger causality test, impulse response functions and generalized variance decomposition to analyze the relationship between monthly tourist arrivals (TA) to the USA, real gross domestic product (GDP) and real effective exchange rates.FindingsResults suggest that GDP Granger causes TA in the USA in the long run, indicating the economy-driven tourism growth hypothesis. Additionally, a shock to GDP generates a positive and significant effect on TA that persists in the long-run, while exchange rate shocks only have a significant effect in the first six months.Research limitations/implicationsDifferent tourism sectors may exert different degrees of influence on the economy. The use of aggregate data on TA in the analysis assumes homogeneity in the industry, thus, only represents the average relationship between tourism and GDP.Practical implicationsThis study provides insight that shapes the investment, marketing, sustainability decisions of the public and private sectors aim at increasing tourist flows to drive economic development at the national, state and local levels.Originality/valueThough several studies have examined the factors influencing the international tourist demand of the USA, this is the first to investigate the causal relationships between tourism, GDP and exchange rates for the USA. It is also the first in the US tourism literature to account for the nature of interactions between the three variables because of innovations in the system.