Causal interactions among tourism, foreign direct investment, domestic credits, and economic growth: evidence from selec
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Causal interactions among tourism, foreign direct investment, domestic credits, and economic growth: evidence from selected Mediterranean countries Ayhan Tecel 1 & Salih Katircioğlu 2 & Elham Taheri 3
& Festus
Victor Bekun 4,5
Received: 10 October 2018 / Accepted: 18 June 2020/ # ISEG – Instituto Superior de Economia e Gestão 2020
Abstract This study explores the nexus between tourism and economic growth in countries bordering the Mediterranean Sea while controlling for foreign direct investment and domestic credits as additional variables within a multivariate panel framework. Empirical evidence is based on annual data from 1995 to 2016 for a panel of 14 selected countries around the Mediterranean Sea region. The findings from the bootstrap panel cointegration test proposed by Westerlund (2007) confirm the long-run equilibrium relationship among the variables under inspection. Subsequently, the Panel Pooled Mean Group Autoregressive Distributed model (PMG-ARDL) estimations suggest positively significant relationships between tourism and economic growth both in short-term, and long-term periods. Thus, this study joins the group of studies that lend support to the tourism-led growth hypothesis. This result was further substantiated by the results of the Dumitrescu and Hurlin (2012) causality analysis, as feedback causality was observed between tourism and economic growth, while unidirectional causality was seen from foreign direct investment to economic growth. That is in support of the foreign direct investment-driven economic growth hypothesis. Strikingly, no causal relationship was observed between domestic credits and economic growth. Keywords Tourism . FDI . Granger causality . Mediterranean region JEL classification C23 . C32 . L82
* Elham Taheri [email protected] * Festus Victor Bekun [email protected] Extended author information available on the last page of the article
A. Tecel et al.
1 Introduction International tourism is one of the leading service sectors around the world, which contributes to the wealth of nations not only out of income level but also out of the culture brought from the other countries. Available studies extensively confirm that tourism is a significant source of income, which contributes to the wealth of nations and closure of economic and financial deficits such as current account deficits and balance of payment deficits (Katircioglu et al. 2018). Previous studies find that tourism significantly impacts on economic agents as well, such as financial and energy markets (Katircioglu et al. 2019, 2018). Tourism growth would mean expansion in financial services and finance-related activities, as also argued by Katircioglu et al. (2018). Thus, it can be easily argued that tourism growth or tourism revenues and financial systems are interrelated. Capital, infrastructure, and knowledge of global marketing, as well as tourism marketing, are the essential factors for development in the tourism sector; this is where foreign direct investment (FDI) comes in. Therefore, tourism a
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