Tourism: the untapped goldmine in the Gold Coast

Abstract

Purpose – This study examines the economic impact of international tourism and currency valuation in the West African country of Ghana. Previously known as the Gold Coast due to its vast gold reserves, Ghana is a developing economy with a sharply devalued currency and a heavy reliance on imports. Design – The paper shows that Ghana’s weak currency can be leveraged to boost international tourism and with that, economic growth. This view of tourism-led growth is in part supported by evidence in which tourism receipts are a major source of foreign exchange earnings for a number of developing economies. Methodology – The relationship between economic growth, tourism receipts, and currency valuation is examined using a vector error correction model. This approach offers an opportunity to not only confirm the existence of a dynamic relationship among the time series but also, the existence of causality both in the short- and long-run. Findings – Cointegration tests confirm the existence of a long-run relationship among the variables. Both tourism and exchange rate are found to positively impact economic growth. Also, there is a long-run causality from exchange rate to tourism receipts. Originality – This is the first empirical study that demonstrates the existence of causality between currency valuation and tourism using data from Sub-Saharan Africa, a region with abundant natural resources but one that remains significantly underdeveloped.