Abstract:
The tourism sector and the tourist arrivals of Sri Lanka have significantly been
affected by the economic instability and the political instability. The main objective
of the study is to identify and find out the impact and association of political and
economic stability on tourist arrivals in Sri Lanka. Therefore the study investigates
more specifically on the contribution made by the Sri Lanka tourism on gross
domestic product and economic development.
The researcher has adopted the time series data from 1980-2017and used Eview
for analysis of the relationship between the variables. Then Unit root test, Multiple
regression, Johnson test, Heteroscedasticity Test, Breusch-Godfrey Serial Correlation
LM Test are used as a tool for data analysis with a help of time series data approach.
In this study, military expenditure and gross domestic product which are independent
variables have been employed as proxy variables.
According to the analysis, military expenditure and gross domestic product have
significant impact on tourist arrivals because of the very fact that both military
expenditure and gross domestic product’s P value is less than 0.05%.The model
revealed that there is negative and significant association between the tourist arrivals
and military expenditure. Nevertheless, there is positive and significant association
between GDP and the tourist arrivals. According to the Adjusted R- squared
value (0.81), 81% of variation in tourist arrivals has been explained by political
and economic stability. Further, the results proved that there is a co-integration
relationship among variables. Thus, this results revealed that the relationship
between tourist arrivals and both GDP and military expenditure are in long term.
