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Foreign Direct Investment and Tourism in Sids: Evidence from Panel Causality Tests

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Abstract:

This study applies panel causality methods to investigate the relationship between foreign direct investment (FDI) and tourism in Small Island Developing States (SIDS). The results of the homogenous and instantaneous causality tests suggest that there is a bidirectional causal relationship between the variables. However, this causality is not homogenous for the group of countries. Indeed, heterogeneous causality procedures indicate that there exists a bidirectional causal relationship for only a small set of countries. For the most part, the causal relationship runs from FDI to tourism, implying that FDI provides much needed capacity for SIDS and therefore allows these countries to expand their tourism product.

Keywords: FOREIGN DIRECT INVESTMENT (FDI); PANEL CAUSALITY TESTS; TOURISM

Document Type: Research Article

Publication date: December 1, 2008

More about this publication?
  • The aim of Tourism Analysis is to promote a forum for practitioners and academicians in the fields of Leisure, Recreation, Tourism, and Hospitality (LRTH). As a interdisciplinary journal, it is an appropriate outlet for articles, research notes, and computer software packages designed to be of interest, concern, and of applied value to its audience of professionals, scholars, and students of LRTH programs the world over.
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