Abstract
The purpose of this study was to investigate the causal relationship between foreign direct investment in tourism and tourism gross value added in Croatia. The study employed econometric techniques, such as the unit root test, Johansen co-integration, and the Granger causality test, in a vector error correction model (V.E.C. model), and the Toda–Yamamoto causality test in a vector autoregressive model (V.A.R. model), using quarterly time-series data from 2000(1) to 2012(4). The results confirm the existence of a stable co-integrated relationship between variables in the long term. A short-term relationship was also proved between foreign direct investment in tourism and gross value added, using the Toda–Yamamoto causality test. By including control variables, the two-way causality between the subject variables was proven using the Granger causality test.
Highlights
Despite the volatility of the tourism sector, Croatia is among those countries the economies of which are extremely dependent on tourism
Given the World Travel and Tourism Council’s (W.T.T.C., 2011) forecasts, the situation will not change significantly in the future1 Due to the non-investment activity in the Croatian economy since the onset of the global financial crisis, which refers to the lack of domestic capital, and the reluctance of foreign investors, it seems logical to assume that further development of Croatian tourism needs foreign direct investment (F.D.I.)
The aim of this paper is to explore the causal relationship between the F.D.I. stock in tourism and tourism gross value added in the Republic of Croatia from 2000 to 2012
Summary
Despite the volatility of the tourism sector, Croatia is among those countries the economies of which are extremely dependent on tourism. Given the World Travel and Tourism Council’s (W.T.T.C., 2011) forecasts, the situation will not change significantly in the future Due to the non-investment activity in the Croatian economy since the onset of the global financial crisis, which refers to the lack of domestic capital, and the reluctance of foreign investors, it seems logical to assume that further development of Croatian tourism needs foreign direct investment (F.D.I.). A scenario that it is important to address, bearing in mind the topic of this paper, is that of major development investments. This scenario puts emphasis on the construction of new
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