TOURISM AND EXPORTS: THE CASE OF SINGAPORE

Abstract

In this paper, we examine the relationship between inbound tourism and exports in Singapore. We address whether there is a long-run relationship between exports and tourism and the direction of causality between these two variables. Our findings suggest a long-run relation between Singapore’s exports and inbound tourism and that the causation is bidirectional. This implies that inbound tourism in Singapore results in a higher demand for its domestic products. This increased demand for Singaporean products, in turn, acting as a positive advertising campaign in favour of Singapore, promotes inbound tourism to this country. The policy implication of these findings is twofold: first, inbound tourism in Singapore not only contributes directly to GDP, employment and the current account via tourism revenues but also by stimulating exports, it improves further the current account of Singapore. Secondly, the stimulation of exports induced by inbound tourism creates favorable sustainability conditions for the entire tourism sector. However, one should be cautious that this effect is taking more than nine months to materialize and that inbound tourism may initially have a negative impact effect on Singapore’s exports as the overtime effect of tourism on exports exhibits a j-curve behaviour.