| Summary: | The huge increase in international tourism receipts have contributed to the upsurge of interest in the role of tourism for economic growth. Malaysia's tourism is apparently the second major contributor in foreign exchange earnings after manufacturing. However, the empirical results with regards to Granger causality between tourism and economic growth are mixed. Thus, the objectives are to determine 1) the long run relationships, 2) the long run triangular Granger causality and 3) the speed of adjustment for economic growth. Based on data from 1974-2010, 1) Johansen cointegration reveals that tourism receipts and education are significantly affecting growth, 2) Granger causality in VECM shows there are bidirectional relationship among economic growth, tourism receipts and education thus witnessing a triangular relationship and 3) the speed of adjustment is moderate. Therefore, it is suggested to the policy makers to further improve and sustain tourism and its sub-sector to generate greater economic growth. © 2012 Taylor & Francis Group.
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