The impact of foreign direct investment on the growth of the tourism sector in Jordan (1980–2016)

Abstract

The study aimed at measuring and analyzing the impact of foreign direct investment (FDI) on the growth of the Jordanian tourism sector during the period 1980–2016. In order to test the stationarity of the variables of the study model, the augmented Dickey–Fuller and the Philips Perron tests were applied. The results showed that the variables were not stationary at their levels, but they become so when taking the first difference with the intercept. The study also found a positive long‐run relationship between the ratio of FDI to gross domestic product (GDP) and the ratio of tourism revenues to GDP according to the cointegration test used, which was the Granger causality test. The test showed a one‐way causal relationship between the ratio of FDI to GDP and the ratio of tourism revenue to GDP. According to the estimation results, the error correction model showed that there is a positive impact of FDI on the growth of the tourism sector. Based on the results reached, the study recommended the need to pay attention to the tourism sector, enhance its role in economic development, and work to provide an optimal investment environment by providing all necessary means for and assistance in establishing such investments. All obstacles that limit the flow of the FDI in the Jordanian tourism sector should be removed.