Attached
Tourism is regarded as a dynamic
economic industry in the world, specifically fo r
developing countries like Sri Lanka. Studies o f the
causality between three variables are rare and to
bridge that gap, this research examines the causal
relationship among International Tourist Arrivals
(ITA), Foreign D irect Investm ent (FDI) and Gross
Domestic Product (GDP) fo r Sri Lanka. Unit root
test. Co-integration test, optim al lag length, Vector
A uto-Regression (VAR) and Granger causality are
em ployed to investigate the relationship between
GDP, FD I and ITA. Annual data from 1985 to 2014
com piled by the Central Bank o f Sri Lanka and
W orld Bank was used in this study. GDP is m easured
by US$ m illions, ITA by the amount o f tourism
visitors, m illion people, and FD I by FD I inward,
USS m illions ’. The results reveal that there is no cointegration am ong GDP, ITA and FDI.
Correspondentfy, Granger causality analysis fin d s
out the short-run influence o f GDP on FD I and ITA.
