THE RELATIONSHIP BETWEEN INTERNATIONAL TOURIST ARRIVALS AND FOREIGN DIRECT INVESTMENT: A GRANGER CAUSALITY ANALYSIS

Ly-Pham Thiminh,Phung-Tran Thiphi,Hieu Leminh

doi:10.18267/j.aop.586

Abstract

It is widely recognized that a rapid increase in foreign direct investment leads to an increase in tourism at different levels. This paper applied a Granger Causality test to investigate the causal relationship between International Tourist Arrivals (ITA) and Foreign Direct Investment (FDI) across countries. By using time series data from six countries in the top ten European destinations (France, Spain, Italy, Germany, Turkey, and the United Kingdom) for the 1980-2014 period, the findings reveal that there is a unidirectional causality between ITA and FDI. The results are strongly proven with the same results when the lag between FDI and ITA is lengthened at lag 1. Moreover, the outcome evidence has a unidirectional relationship running from FDI to ITA when GDP is added as the controlling variable.

Highlights

Tourism has recently intensified to become the prevailing industry that attracts substantial support from governments [Lashkarizadeh, Gashti & Shahrivar, 2010] and generates a vast income for many nations
In order to empirically examine the fundamental correlation between international tourist arrivals (ITA) and Foreign Direct Investment (FDI), the Granger causality is used with two controlled variables for testing the impression of tourism on FDI and vice versa
This paper has investigated the causal relationship between International Tourist Arrivals and Foreign Direct Investment for a group of European countries using the Granger causality analysis by taking into account the variables from a group of EU countries from 1980 to 2014

Summary

Introduction

Tourism has recently intensified to become the prevailing industry that attracts substantial support from governments [Lashkarizadeh, Gashti & Shahrivar, 2010] and generates a vast income for many nations. Current modern research on the pragmatic relationship between FDI and ITA is still limited and reveals contradictory results researchers discovered that tourism is a catalyst for FDI growth in the case of Turkey. This finding is supported by Gunduz and Hatemi [2005], Ongan and Demiroz [2005], Salih [2011] and Ongan and Demiroz [2005].

Methods

Results

Conclusion