Tourism Sector in the Short-Run and Economic Growth in North Sumatra, Indonesia


  • Parhimpunan Simatupang
  • . .
  • . .





Tourism, tourism receipts, economic growth, Short-run, co-integration, Granger causality, North Sumatera


In many developing countries, tourism is used as a main strategy to achieve greater economic performance. Increased income, both directly and as a result of the multiplier effects of tourism revenues, earnings of foreign exchange, new employment opportunities, access to foreign direct investment and economic diversification are the potential economic benefits of tourism. Statistics on international tourist arrivals in Indonesia showed an upward trend over the past few years and reached the highest number in 2014, recording almost 9.44 million arrivals. The province of North Sumatra is well known as a tourist destination, as well as an economic hub and commercial centre.  Indeed, the province was able to attract almost 28% (237,830) of tourist arrivals in 2014, an increase of 4.12 % from 2013. With such a tourist arrivals trend, the tourism sectors has significantly contributed to the economic development of North Sumatera.  This paper examined the role of tourism receipts in the short-run economic growth in North Sumatra through error correction method (ECM) from 1986-2014. Econometrics method were used, such as Augmented Dickey-Fuller (ADF) for unit root test, error correction method (ECM) for short run dynamics, and Granger causality test for causal relationships. The standard Granger causality test reveals that there is a unidirectional short-run Granger causality from tourism receipts to economic growth. This study provides evidence to support a tourism-led growth hypothesis in North Sumatra.




[1] Andreas G. Georgantopoulos (2013), “Tourism expansion and economic development†var/vecm analysis and forecasts for the case of India Asian Economic and Financial Review, 2013, 3(4):464-482

[2] Andrea Colantonio, (2005), Tourism development, Economic Opening Up and Planning Issues in Cuba since 1989.

[3] Agarwal, J. P. (1980), ‘Determinants of Foreign Direct Investment: A Survey, Weltwirtschaftliches Archiv, 116, 739–73.

[4] Bergstrand, J. H. and P. Egger (2007). "A Knowledge-and-Physical-Capital Model of International Trade, Foreign Direct Investment, and Foreign Affiliates Sales: Developed Countries." Journal of International Economics 73(2): 278-308.

[5] Beugelsdijk Sjoerd, Roger Smeets, Remco Zwinkels Nijmegen, The impact of horizontal and vertical FDI on host’s country economic growth School of Management, Nijmegen University, Thomas van Aquinostraat, 2008

[6] Blonigen Bruce A, Review of the empirical literature on FDI determinants , Working Paper National Bureau of Economic Research, 2005

[7] Bryden. J. (1980). Tourism and Development. New York/London: Cambridge University Press

[8] Baker, C. (2003), Claridges to invest R1bn in SA available at:

[9] Bala Ramasamy and Matthew Yeung...,(2010), The Determinants of Foreign Direct

[10] Investment in Services, The World Economy Blackwell Publishing Ltd.,

[11] Christopher Sadleir..,(2007), Australia’s policy approach to Foreign Direct Investment 1968-2004 as a case study in globalization, national public policy and public administration.

[12] Chakrabarti, A. (2001) The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions, KYKLOS, 54, 89-114

[13] Dritsakis, Nikolas, (2004) : “Tourism as a Long Run Economic Growth Factor: An empirical investigation for Greeceâ€, Tourism Economics, 10, pp. 305-316.

[14] Durbarry, R. (2000). "Tourism expenditures in the UK. Analysis of competitiveness using a gravity-base model". Christel DeHaan Tourism and Research Institute, University of Nottingham.

[15] Durbarry, R. (2004) Tourism and economic growth: the case of Mauritius, Tourism Economics, 10, 389–401.

[16] Dumludag Devrim ..,An analysis of the determinants of Foreign Direct Investment in Turkey : The role of institutional context, 2007

[17] Endo K..,(2006) Foreign Direct Investment in Tourism Flows and Volumes Journal of Tourism Management 27, P.600-614

[18] Fourie, J. and M. Santana-Gallego (2011). "The impact of mega-events on tourist arrivals." Tourism Management Vol 32(6): 1364-1370.

[19] Head, K. and J. Ries (2008). "FDI as an Outcome of the Market for Corporate Control: Theory and Evidence." Journal of International Economics 74(1): 2-20.

[20] Helpman, E. and Krugman, P. (1985), Market Structure and Foreign Trade, MIT Press, Cambridge, MA

[21] Hong Zhuang and Robert St Juliana..,(2010), Determinants Of Economic Growth: Evidence From American Countries The International Business & Economics Research Journal, pg. 65

[22] Jauhari Vinnie..,(2009), Hospitality, tourism and economic growth in India, Worldwide Hospitality and Tourism Themes Vol. 1 No. 1, 2009 pp. 7-11

[23] José L. de la Cruz Gallegos, Carlos Canfield Rivera, José Antonio Núñez Mora(2010), “Drivers of Economic Growth: The Case for Tourism in Mexico†R. Bras. Eco. de Emp. 2010; 10(2): 38-53

[24] J.A. Snyman, M. Saayman, (2009),"Key factors influencing foreign direct investment in the tourism industry in South Africa", Tourism Review, Vol. 64 Iss: 3 pp. 49 – 58

[25] Mustafa and Dr. S. Santhirasegaram (2014), Empirical investigation of the relationship between tourism receipts and sustainable economic growth in Sri Lanka, Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 5(7):131-137Scholarlink Research Institute Journals, 2014 (ISSN: 2141-7024

[26] Naudé, W. A. and A. Saayman (2005). "Determinants of tourist arrivals in Africa: a panel data regression analysis." Tourism Economics 11(3): 365-391.

[27] Naude , W.A. and Krugell, W.F. (2003), ‘‘Human resource development and foreign direct investment in Africa’’, unpublished paper prepared for the African Perspectives Yearbook 2003, Institute for World Economics and International Management, University of Bremen, Bremen.

[28] Norsiah Kadir, Mohd. Zaini abd. Karim (2012), “ Tourism and economic Growth in Malaysia “ Evidence from tourist arrival from5 ASEAN countries Economic research, vol.25

[29] Peric J and Niksic Maja Radic : Impact of Foreign Direct Investment in Tourism on Economic Growth in Developing Countries, Tourism & Hospitality Management 2010, pp. 537-549

[30] Paula Neto, Antonio Brandao and Antonio Cerqueira..,(2010) The Macroeconomic Determinants of Cross-Border Mergers and Acquisitions and Greenfield Investments , The IUP Journal of Business Strategy, Vol. VII, Nos. 1 & 2

[31] Robert M. Solow..,(1956), A Contribution to the Theory of Economic Growth, The Quarterly Journal of Economics, Vol. 70, No. 1, pp. 65-94

[32] Pin Ng & Ding Du (2011), “ Is tourism a long-run economic growth factor “ Working Paper Series,12-02 December

[33] Reid, D. 2003 Tourism, Globalization and Development: Responsible Tourism Planning (London: Pluto Press)

[34] Selvanathan, S., Selvanathan, E.A. and Viswanathan, B. (2012) “Causality between Foreign Direct Investment and Tourism: Empirical Evidence from Indiaâ€, Tourism Analysis, 17(1): 91-98

[35] Sekaran, U., & Bougie, R. (2010). Research Methodology for Business - A Skill Building Approach (5th ed.). West Sussex, United Kingdom: John Wiley & Sons Ltd.

[36] Tiago Neves Sequeiraa and Paulo Maca Nunes (2008), “ Does tourism influence economic growth†A dynamic panel data approach Applied Economics, 40, 2431–2441

View Full Article:

How to Cite

Simatupang, P., ., ., & ., . (2018). Tourism Sector in the Short-Run and Economic Growth in North Sumatra, Indonesia. International Journal of Engineering & Technology, 7(3.32), 43–46.
Received 2018-08-28
Accepted 2018-08-28
Published 2018-08-26