From Tourism Growth to Sustainable Development: A Causality Analysis of Tourism, Exchange Rates, and Economic Growth in Asia

ABSTRACT Tourism is widely recognised as a catalyst for sustainable development, particularly in regions where it supports employment, foreign exchange earnings and local entrepreneurship. However, the extent to which tourism contributes to sustainable development depends on macroeconomic stability and policy environments that enable long‐term investment rather than short‐term revenue maximisation. This study examines the causal relationships between tourism receipts, per capita GDP (PGDP), and exchange rates across 46 Asian countries from 2000 to 2020, while controlling for trade openness to account for broader external sector exposure. Employing a panel data framework that accounts for cross‐sectional dependence, heterogeneity, and mixed integration properties, the analysis combines second‐generation unit root and cointegration tests with country‐specific Granger causality techniques. The findings reveal substantial heterogeneity in causal dynamics across countries. In some economies, tourism‐led growth emerges, where expanding tourism receipts stimulate economic growth. In others, economy‐driven tourism dominates, indicating that rising income levels facilitate tourism development through improved infrastructure and destination competitiveness. Exchange rate stability plays an important conditioning role, shaping the extent to which tourism revenues translate into sustained development gains. Countries characterised by stable exchange rate environments are better positioned to channel tourism income toward long‐term, sustainability‐oriented investments. The study offers actionable policy insights by demonstrating that macroeconomic stability is a prerequisite for sustainable tourism development. Strengthening exchange rate governance, promoting eco‐friendly tourism investment, and enhancing regional cooperation can support a transition from growth‐oriented tourism strategies toward sustainable development pathways.