FDI-led tourism growth hypothesis: empirical evidence from Croatian tourism

Open access

Abstract

The aim of this paper is to explore the causal relationship between the foreign direct investment (FDI) stock in tourism and the number of international tourist arrivals in the Republic of Croatia in the period from 2000 to 2012. The study uses quarterly time series data from 2000(1) to 2012 (4). The augmented Dickey–Fuller (ADF) test was carried out to test the stationarity of variables. The Johansen co-integration test was used to test a long-term relationship between the variables, and given the absence of the same, the vector autoregression (VAR) model is set up. The Granger and Toda–Yamamoto test was conducted to test a short-run causality between the selected variables. The results indicated a one-way short-run causality relationship running from FDI in tourism to international tourism arrivals at a high significance level of 1%. The research results emphasise the need to establish a favourable macroeconomic environment, as well as a policy of incentive investment measures specifically targeted at the tourism sector. This would enhance the conditions for higher FDI inflow essential for qualitative and quantitative positioning of Croatian tourism compared to competing destinations.

[1] Bezić, H., Nikšić Radić, M., & Kandžija, T. (2010). Foreign Direct Investments in the Tourism Sector of the Republic of Croatia. Valahian Journal of Economic Studies - an international review of theories and applied studies in performance management, 1(15), 21-28

[2] Central Bureau of Statistics. (2013). Statistical Yearbook of the Republic of Croatia. Zagreb: CBS

[3] Chowdhury, A., & Mavrotas, G. (2006). FDI and Growth: What Causes What? World Economy, 29(1), 9-19

[4] Craigwell, R., & Moore, W. (2007). Foreign direct investment and tourism in SIDS: Evidence from panel causality tests. Tourism Analysis, 13(4), 427-432

[5] Dunning, J., & Kundu, S. K. (1982). Impact of Transnational Hotel Chains and Management Companies Operating in Developing Countries u Transnational Corporations in International Tourism. Retrieved July 10, 2013, available at: http://unctc.unctad.org/data/e82iia9b.pdf

[6] Dwyer, L., Forsyth, P., & Dwyer, W. (2010). Tourism Economics and Policy. Cheltenham: Channel View Publications

[7] Endo, K. (2006). Foreign direct investment in tourism – flows and volumes. Tourism Management, 27(4), 600-614

[8] FDi Intelligence. (2012). FDI into Tourism (Croatia). London: The Financial Times Ltd

[9] Fereidouni, H. G., & Al-mulali, U. (2014). The interaction between tourism and FDI in real estate in OECD countries. Current Issues in Tourism, 17 (2), 105-113

[10] Ford, T. C., Rork, J. C., & Elmslie, B. T. (2008). Foreign Direct Investment, Economic Growth, and the Human Capital Threshold: Evidence from US States. Review of International Economics, 16(1), 96-113

[11] Giles, D. (2011). Testing for Granger Causality. Retrieved November 16, 2013, available at: http://davegiles.blogspot.com/2011/04/testing-for-granger-causality.html

[12] Gujarati, D. (2004). Basic Econometrics, Fourth Edition. New York: McGraw-Hill

[13] Lashkarizadeh, M., Keshmir, Z., & Gashti, H. P., (2012). Evolution of the Relationship between Tourism Industry and Economic Growth in Iran. Asian Journal of Business and Management Sciences, 1(9), 88-97

[14] Liu, W. (2005), Determinants of the Semiconductor Industry Cycles. Journal of Policy Modelling, 27, 853-866

[15] Katircioglu, S. T. (2009). Revisiting the tourism-led-growth hypothesis for Turkey using the bounds test and Johansen approach for cointegration. Tourism Management, 30(1), 17-20

[16] Karticioglu, S. T. (2011). The Bounds Test to the Level Relationship and Causality between Foreign Direct Investment and International Tourism: The Case of Turkey. E & M Ekonomie and Management (Economics and Management), XIV(1):, 6-13

[17] Kundu, S.K., & Contractor, F.J. 1999. Country location choices of service multinationals: An empirical study of the international hotel sector. Journal of International Management, 5(4), 299-317

[18] Malešević, Perović, L. (2009). Cointegration Approach to Analysing Inflation in Croatia. Financial Theory and Practice, 33 (2), 201-218

[19] Mavrotas, G., & Kelly, R. (2001). Old Wine in New Bottles: testing Causality between Savings and Growth. The Manchester School, 69, 97-105

[20] Othman, R., Salleh, N. H. M., & Sarmidi, T. (2012). Analysis of Causal Relationship Between Tourism Development, Economic Growth and Foreign Direct Investment: an ARDL Approach. Journal of Applied Sciences, 12, 1245-1254

[21] Sinclair, M.T. (1991). The tourism industry and foreign exchange leakages in a developing country. In: Sinclair, M.T. & Stabler, M.J., The Tourism Industry: An International Analysis. Wallingford: CAB

[22] Salleh, N. H. M., Othman, R., & Sarmidi, T. (2011). An Analysis of the Relationships between Tourism Development and Foreign Direct Investment: An Empirical Study in Selected Major Asian Countries. International Journal of Business Social Science, 3(2), 250-257

[23] Samimi, A. J., Sadeghi, S., & Sadeghi, S. (2013). The Relationship between Foreign Direct Investment and Tourism Development: Evidence from Developing Countries. International Journal of Institutions and Economies, 5(2), 59-68

[24] Sanford, D. M., & Dong, H. (2000). Investment in familiar territory: tourism and new foreign direct investment. Tourism Economics, 6(3), 205-219

[25] Selvanathan, S., Selvanathan, E. A.,, & Viswanathan, B. (2012). Foreign Direct Investment and Tourism: Empirical Evidence from India, Tourism Analysis, 17(1), 91-98

[26] Surugiu, C., & Surugiu, M. R., (2013), Is the tourism sector supportive of economic growth? Empirical evidence on Romanian tourism, Tourism Economics, 19 (1), 115-132

[27] Tang, S., Selvanathan, E. A.,, & Selvanathan, S. (2007). The relationship between foreign direct investment and tourism: empirical evidence from China, Tourism Economics, 13(1), 25-39

[28] Toda, H. Y., & Yamamoto, T. Statistical Inference in Vector Autoregressions with Possibly integrated Processes. Journal of Econometrics, 66, 225-250

[29] UNCTAD. (2007). FDI in Tourism: The Development Dimension. New York and Geneva: United Nations

[30] UNWTO. (2004). General Guidelines for the Development of Foreign Direct Investment Indicators on the Tourism Sector, Madrid: WTO

[31] Vaugeois, N. (2000). Tourism in developing countries: refining a useful tool for economic development. 6th World Leisure Congress Proceedings. Bilbao

[32] Zachariadis, T. (2006). On the Exploration of Causal Relationships between Energy and the Economy (Discussion Paper 2006-05). Cyprus: Department of Economics, University of Cyprus

[33] Zhang, K. H. (2001). Does Foreign Direct Investment Promote Economic Growth? Evidence From East Asia and Latin America. Contemporary Economic Policy

[34] Zhang, J. Ebbers, H., & Zhou, Ch. (2011). Flows of Tourists, Commodities and Investment: The Case of China. In: Matias, A., Nijkamp, P., & Sarmento, M. (eds.). Tourism Economics Impact Analysis, Lisboa: Springer

European Journal of Tourism, Hospitality and Recreation

The Journal of CiTUR Centre of Tourism Research, Development and Innovation

Journal Information

Cited By

Metrics

All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 358 323 16
PDF Downloads 136 129 16