This paper is the first study as far as I am aware that uses panel techniques

This paper is the first study as far as i am aware

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This paper is the first study - as far as I am aware - that uses panel techniques in a country-pair setting to isolate and estimate the causal relationship going from leisure tourist flows to exports. This is also the first study that sheds light on the types of products that are affected by tourist flows. The literature has mainly focused on the relationship between tourism and trade (both exports and imports) for a single country using time series while testing for such a relationship using cointegration and Granger causality tests. The literature has also acknowledged the role of business travel in pro- moting trade. In terms of policy, this study suggests that boosting tourist flows has effects on domestic economic activity through exports in addition to the traditional channels of job creation and investment. It also suggests that firms can increase their exports by increasing the tourists’ exposure to their products and brands. This study is related to the relatively small literature on the relationship between tourism and trade. Many of the existing studies apply time series analyses and co- integration techniques to study this relationship. The findings from this literature gen- erally confirm a two-way relationship between trade and tourism but the direction and magnitude of this relationship differs by study. Kulendran and Wilson (2000) find sup- port for a long-run relationship between international trade and tourism for Australia. Using Granger causality, they find one-way causality from holiday travel from Japan to exports from Australia to Japan. Kadir (2010) find a causal link going from exports to international tourism receipts and not vice versa for Malaysia. They however find a causal link running from imports to international tourism receipts. Khan et al. (2005) - also using Granger-causality for Singapore - find evidence for a causal link between business trips and exports only. Fischer and Gil-Alana (2009) find using long memory time series regressions that tourism from Germany to Spain has an effect on Spanish wine exports to Germany that lasts for a few months. All of these studies study the link between tourism and trade for a single destination country and in the case of Fischer and Gil-Alana (2009) for a single product. None of the studies in this literature uses the variation provided by the available bilateral trade and tourist flows between many countries. Also no study apart from Fischer and Gil-Alana (2009) in this literature has anything to say about the type of products that are affected by tourism. This study is also linked to the general literature on the determinants of bilateral trade flows. This literature mainly deploys the gravity model. First used by Tinber- gen (1962) to explain trade flows, the gravity equation was later given its theoretical foundations by Anderson (1979), Bergstrand (1985), and Anderson and van Wincoop (2003) 4 .The gravity model has since become the workhorse for studying bilateral trade 4 Other notable contributions to the theoretical foundations of the gravity model include Deardorff 3
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flows between countries. Numerous studies use the gravity model to estimate the effects
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