Do Foreign Direct Investment Inflow and Trade Openness Influence International Tourism Demand in Africa? A Study of the Post-Global Financial Crisis Era

Abstract

Following the paucity of evidence on the roles of foreign direct investment (FDI) inflow and trade openness in Africa’s tourism development, particularly in the post-Global Financial Crisis era, this study examined the roles of FDI inflow and trade openness as drivers of international tourism demand in Africa. We also investigated how infrastructural development, terrorism, climatic conditions, and institutional quality influence the FDI-tourism and trade openness-tourism relationships in Africa. The system GMM modeling framework and a panel of 42 African countries were used. We find that FDI inflow has not contributed significantly to the growth of tourism demand in Africa. However, infrastructure and climatic conditions on the continent have the potential to positively influence the FDI-tourism relationship, while terrorism hampers it. We also find that trade openness impacts positively on international tourism demand in Africa, but this impact is mainly insignificant. The study made some policy recommendations based on these findings.