Causal Dynamics Between Tourism Receipts, Economic Growth, and Real Exchange Rate in Algeria’s Economy Between 1990 and 2019

Abstract

This study aimed to clarify the relationship between economic growth and tourism revenue in the Algerian economy. It focused on the relationship between economic growth, real exchange rate, and tourism receipts. This investigation is intended to fill a gap in the empirical literature on the tourism sector in developing countries. It used the autoregressive distributed lag model adopted from 1990 through 2019. The relationship between economic growth, tourism receipts, and real exchange rate in Algeria is a unidirectional causality relationship; and the tourism receipts and the real exchange rate affect the economy in the short and long term. In terms of long-term equilibrium, there was a positive but nonsignificant impact of tourism receipts on economic growth. At the same time, there was no significant effect of the real exchange rate on economic growth. In the short term, there was a positive and significant impact of tourism receipts lag on economic growth. A positive and significant impact of the second difference lag of the real exchange rate was found. Algerian decision-makers can benefit from these findings when developing the tourism sector. This is the first examination of the effect of these variables in Algeria during the period between 1990 and 2019.