Forecasting Tourism Expenditure and Growth : A VAR/VECM Analysis for Greece at Both Aggregated and Disaggregated Levels

Tourism is one of the most important factors in the productivity of the Greek economy with significant multiplier effects on the country's economic activity. This study tests for the existence and direction of causality between output growth and tourism expenditure using a trivariate model with real effective exchange rate, analysed as a whole and in sub-categories respectively for the period 1988-2011. Results from the aggregated model indicate that all variables return to their long-run equilibrium relationships and unidirectional causal relationship is reported from tourism expenditure to real output in the short-run. Moreover, results from the disaggregated model imply strong bidirectional causal links between growth and business travel and tourism spending (BTS) in the longrun and unidirectional causal links from leisure travel and tourism spending (LTS) to growth and to BTS. Forecasts for the period 2012-2020 indicate increasing total tourism expenditure and particularly for the case of BTS