Does Tourism Contribute to Economic Growth of Hong Kong and Boost Its Housing Prices? An Investigation of the Relationship Between Tourism Development and Housing Prices

Tourism plays a significant role in economic growth and is therefore extensively researched. Tourism-driven economic growth may, however, generate side effects. The main objective of this paper is set into two folds. First, investigation of the relationship between tourism development and economic growth and set up tourism-led growth hypothesis (TLGH). Second, examination of the relationship between tourism expansion and housing prices in Hong Kong for the period from 1990 to 2019. While the general neoclassical Cobb-Douglas production function is the framework, the set of time series auto-regressive distributed lag (ARDL) with error correction model (ECM) are the core approaches. The co-integration with bounds test, Granger causality test and variance decomposition analysis are being used for both short-run and long-run hypotheses. Deploying the autoregressive distributed lag (ARDL) modelling to determine how macroeconomics variables influence the housing prices in Hong Kong in the short run as well as in the long run, and to what degree. More specifically, this study attempts to achieve the following objectives: (1) To find out the major factors influencing housing prices in Hong Kong. (2) To examine the impact of Chinese tourist mobility on housing prices in Hong Kong. (3) To identify whether there a short-run or long-run association between housing prices and tourism growth. And (4) To find out the extent to which the government policy can promote healthy housing development on balance of economic growth mechanisms. As a result, the findings empirically support that the tourism-led growth hypothesis (TLGH) in Hong Kong is valid. In addition, tourism development does play an important role in boosting local housing prices especially during the post-SARS period.
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