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

Tourism is an activity where capital, infrastructure, knowledge and access to global marketing and distribution chains are critical. Foreign direct investment (FDI) is often considered one of the most effective engines for harnessing these elements. This study applies panel causality methods to investigate the relationship between FDI and tourism in Developing Countries during 1882-2002. For this purpose, the Hsiao's-Granger and Toda & Yamamoto (TY) causality tests used for investigating causality relationship between two variables.The model estimation reveal finds that there is unilateral causality from tourismto FDI. With respect to results of this study, the main implication policy is that the policy makers and economic planners should be adopting the suitable policies to improve tourism industry.