The aim of the present study is to investigate the causal nexus between tourism expansion and economic growth for the panel of 13 selected Asia-Pacific nations over the period 1995-2014. Using econometric techniques like tests for panel unit root, panel cointegration and Panel Vector Autoregressive (PVAR) model by means of Arellano and Bond (1991) Generalized Method of Moments (GMM) estimation, the results show that there is no long-run relationship between tourism expansion and economic growth for the selected Asia-Pacific nations. Besides, the results of PVAR-GMM estimation show that tourism expansion and economic growth are independent of each other in the short run and also do not validate either tourismled growth hypothesis or growth-led tourism hypothesis for the sample nations. The results suggest that the governments of the selected Asia-Pacific countries should give more importance to economic policies to promote economic growth more than paying attention towards promoting inbound tourism in the region.

The correlation between tourism and economic growth has been well documented in literature. It has been asserted that international tourism has a positive effect on long-run economic growth through different channels. First, tourism is a significant foreign exchange earner which allows for payment of imported capital goods or the basic inputs used in the production process. Second, tourism plays an important role in stimulating investment in new infrastructure and competition between local firms and firms in other tourist countries. Third, tourism encourages other economic industries by direct, indirect and induced effects. Fourth, tourism contributes to generating employment and increasing income. Fifth, tourism can cause national firms to enjoy economies of scale (Fagance, 1999; Lin and Liu, 2000; Andriotis, 2002; and Schubert et al., 2011). Finally, tourism is an important factor in the diffusion of technical knowledge, stimulation of research and development, and the accumulation of human capital. Tourism has become a focal point for world economies, especially for Asia-Pacific nations.

Applied Economics Journal, Tourism Expansion, Economic Growth, Asia-Pacific Nations, Panel Vector Autoregressive (PVAR), Heterogeneity Panel Cointegration, Causality Approach.