Causality between Terrorism and FDI in Tourism: Evidence from Panel Data

Maja Nikšić Radić,Marina Barkiđija Sotošek,Daniel Dragičević

doi:10.3390/economies7020038

Maja Nikšić Radić, Marina Barkiđija Sotošek + Show 1 more

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https://doi.org/10.3390/economies7020038

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Journal: Economies	Publication Date: May 6, 2019
Citations: 5	License type: CC BY 4.0

Affiliation: University of Rijeka

Abstract

The aim of this research was to examine the causal link between terrorism and FDI in tourism on the example of a panel of 50 countries for the period from 2000 to 2016. Other control variables were included in order to ensure the validity of the results—number of international tourist arrivals per capita, the KAOPEN index, the KOF Globalisation Index and GDP per capita. The main goal was to look at this issue from the perspective that terrorism does not affect FDI in tourism. The research employed the Granger causality test in a vector autoregressive model (VAR model), the analysis of variance decomposition and the impulse response function within the panel setting. Based on research results, it was found that terrorism does not Granger cause FDI in tourism. The results are in line with recent research related to the subject matter which indicated that the negative effect of terrorism on FDI in tourism was questionable.

Highlights

The global economy has faced a sequence of serious challenges in the 21st century
The Bali bombings had a huge impact on international tourism, foreign-owned resorts with strong marketing helped restore confidence in Bali after the terrorist attack
Stationarity of the variables was tested for all time series, and the results of the unit root test indicate that all series are stationary in level, which is evident from the Table 2

Summary

Introduction

Even though globalisation brought benefits to most stakeholders, the increased interconnectedness of the global economy correspondingly caused several issues. Some of these problems are of a short-term nature (such as the global financial crisis from 2008), while some have long-term features (such as global inequality, sustainable development or terrorism). The recent decades have seen a powerful boom in touristic development and tourism has been recognised as a global economic driver and one of the fastest growing sectors of the global economy (UNWTO 2017). The globalization of tourism is occurring simultaneously with the globalization of the world economy predominantly characterised by international capital movements, most notably in the dimension of its external flow and activity.

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