An analysis of a five-variable vector autoregressive (VAR) model demonstrates the positive short-run effect of tourism on Hong Kong’s economic growth. The five variables are real output, real capital, labor, openness, and tourism. Among other findings, the analysis supports the commonly held notion that tourism promotes economic growth. However, the analysis could not confirm a long-term effect of tourism on economic growth. The analysis also shows that Hong Kong’s economy is capital-driven, while labor is not a significant economic driver.
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