Causal interactions among tourism, foreign direct investment, domestic credits, and economic growth: evidence from selected Mediterranean countries
Abstract
This study explores the nexus between tourism and economic growth in countries
bordering the Mediterranean Sea while controlling for foreign direct investment and
domestic credits as additional variables within a multivariate panel framework. Empirical evidence is based on annual data from 1995 to 2016 for a panel of 14 selected
countries around the Mediterranean Sea region. The findings from the bootstrap panel
cointegration test proposed by Westerlund (2007) confirm the long-run equilibrium
relationship among the variables under inspection. Subsequently, the Panel Pooled
Mean Group Autoregressive Distributed model (PMG-ARDL) estimations suggest
positively significant relationships between tourism and economic growth both in
short-term, and long-term periods. Thus, this study joins the group of studies that lend
support to the tourism-led growth hypothesis. This result was further substantiated by
the results of the Dumitrescu and Hurlin (2012) causality analysis, as feedback
causality was observed between tourism and economic growth, while unidirectional
causality was seen from foreign direct investment to economic growth. That is in
support of the foreign direct investment-driven economic growth hypothesis. Strikingly, no causal relationship was observed between domestic credits and economic
growth.
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19Issue
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