Abstract:
In countries like Maldives, Malaysia, Singapore and Spain, tourism and related recreation
activities play a significant role in the generation of income / foreign exchange and
provision of employment opportunities. In fact, in the global context this industry is
identified as the single largest economic contributor. Moreover, tourism plays a crucial
role in the attainment of macroeconomic stability. Besides, the political stability of a
country has a major impact on its tourism industry. According to the preceding view, this
paper aims at analysing empirically the significance of tourism in the Sri Lankan
economy from 1970 to 2008. The relationship will be analyzed based on a time series
approach. The study will endeavour to estimate the relationship between economic
performance and tourism revenue, subject to main macroeconomic variables and political
stability of the country. With respect to policy implications, the study recommends that
the role of tourism could be highly emphasized in the sustainable economic development
with a stable political environment.
