Abstract

This study explores the relationship between tourism development and economic growth in high tourist arrival country such as the United States of America (USA) by adopting the wavelet transform approach using monthly data over the period 1996M01-2015M08. Three innovative techniques that are continuous wavelet, wavelet coherence power spectrum and wavelet based Granger causality that consider the decomposition of time-series at different time frequencies, are utilized to conduct the study. The results of autoregressive distributed lag and combine cointegration tests show that there is a significant long-run relationship occurs between tourism development and economic growth in USA. Furthermore, the results indicate that there is a unidirectional causal influence of economic growth on tourism development in the short-run whereas, in the long-run the opposite causal relationship is evident in USA. Thus it can be recommended that government needs to increase and promote tourism demand and further providing and nurturing the expansion of tourism supply with the advancement of economic growth.