Answer Happy

Dritsakis (2004) empirically examines the impact of tourism on the long-run economic growth of Greece by using a causality analysis of real gross domestic product (LGDP), international tourism carnings (LITR) and real effective exchange rate (LEXR); all are in logarithmic values. A three- variable VAR model with an error correction mechanism is applied for the period 1960:1-2000:IV. Based on the ADF unit root test and the Johansen cointegration test, he concludes that the three variables are integrated of order one and there exists one cointegrating relation. (a) Write the VECM model which includes one lagged dependent variable and the error correc- tion term, z, LGDP,-ALITR,-,LEXR,- (b) Using the notations in (a), write the null and alternative hypotheses which can test "Does tourism (LITR) cause economic growth (LGDP) in the short run?" (c) Using the notations in (a), write the null and alternative hypotheses which can test "Is eco- nomic growth (LGDP) caused by tourism (LITR) and exchange rate (LEXR) in the long run?"
Dritsakis (2004) empirically examines the impact of tourism on the long-run economic growth of Greece by using a causality analysis of real gross domestic product (LGDP), international tourism earnings (LITR) and real effective exchange rate (LEXR); all are in logarithmic values. A three- variable VAR model with an error correction mechanism is applied for the period 1960:1–2000:IV. Based on the ADF unit root test and the Johansen cointegration test, he concludes that the three variables are integrated of order one and there exists one cointegrating relation. (a) Write the VECM model which includes one lagged dependent variable and the error correc- tion term, 2-1 = LGDP - ALITR, - 1, LEXR, (b) Using the notations in (a), write the null and alternative hypotheses which can test "Does tourism (LITR) cause economic growth (LGDP) in the short run?" (c) Using the notations in (a), write the null and alternative hypotheses which can test "Is eco- nomic growth (LGDP) caused by tourism (LITR) and exchange rate (LEXR) in the long run?"