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Foreign Direct Investment and Tourism Development in Africa

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This study examines the nexus between foreign direct investment (FDI) inflow and tourism development. Using annual data for 44 countries in Africa from 1995 to 2014, and three different specifications of panel autoregressive distributed lag model, the study investigates short-run and long-run dynamics between FDI and tourism development. The study finds a significant positive relationship and a bidirectional long-run causality between FDI inflows and tourism development. In addition, the results show a negative short-run relationship between exchange rate and tourism development. Furthermore, there is evidence that economic growth and political stability are important determinants of tourism development on the African continent. A major policy implication is that creating a politically stable environment and sustaining a growing economy help attract FDI inflows to boost tourism development.
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Keywords: Africa; Foreign direct investment; exchange rates; tourism development

Affiliations: 1: Pan-African University 2: Kwame Nkrumah University of Science and Technology 3: University of Roehampton 4: Pan Atlantic University

Appeared or available online: July 31, 2020

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