Abstract:
Tourism is one of the largest and fastest growing industries in the world. Tourism has become one of the most
significant sectors in many developing countries. Tourism has been identified as one of key industries in promoting
sustainable economic growth and development of Sri Lanka. The aim of this study is to investigate long-run and shortrun relationship between tourism and economic growth in Sri Lanka. Using annual data covering the period of 1978
to2011. Minitab, Excel and E-views software were used for data analysis. Time-series econometrics techniques were
used, namely Augmented Dickey-Fuller (ADF) for unit root test, Engle–Granger for co-integration, and Granger
causality test for causal relationships. The findings of the study showed that there is a positive relationship between
tourism receipts and economic growth in the long-run and Granger causality test results revealed that the unidirectional
causality from tourism earnings helped the economic growth. The results of this study suggests that government should
focus on economic policies to promote more international tourism as a potential source for sustainable economic growth
in Sri Lanka
