Is Financial Development a Determinant of Tourism? A Case of Selected Emerging Markets
Keywords:Emerging markets; Financial Development; Tourism; Panel Data
This paper examined the influence of financial development on tourism growth in selected
emerging markets with the aid of panel data (2001-2019). The influence of the combination between
financial and development of human capital on tourism growth in selected emerging markets was also
investigated. Fully modified ordinary least squares (FMOLS), fixed effects, pooled ordinary least
squares (OLS) and the random effects were the econometric estimation methods employed in this study.
In a nutshell, factors such as financial sector development, foreign direct investment, trade openness,
development of human capital and economic growth and the complementarity variable had a significant
positive influence on tourism growth in selected emerging markets. To enhance tourism growth,
selected emerging markets are urged to design and implement policies and programmes earmarked at
increasing financial development, foreign direct investment, trade openness, economic growth and
development of human capital. Threshold panel regression analysis could be another avenue through
which the influence of financial development on tourism is examined in future.
Adeola, O.; Boso, N. & Olaniyi, E. (2018). Drivers of international tourism demand in Africa. Business
Economics, 53 (1), pp. 25-36.
Al-Mulali, U.; Solarin, S.A. & Gholipour, H.F. (2020). Relationship between financial development
and inbound tourism: A revisit, Journal of Public Affairs, 21 (3), pp. 1-5.
Assaf, A.G. & Josiassen, A. (2012). Identifying and ranking the determinants of tourism performance:
A global investigation. Journal of Travel Research, 51 (4), pp. 388-399.
Aye, G.C. & Edoja, P.E. (2017). Effect of economic growth on CO2 emission in developing countries:
Evidence from a dynamic panel threshold regression model. General and Applied Economics,
Ayyappan, S.V.; Kumar, S. & Jose, J. (2014). Infrastructural determinants of tourism in India, Atna
Journal of Tourism Studies, 9 (1), pp. 63-73.
Banday, U.J. & Ismail, S. (2017). Does tourism development lead positive or negative impact on
economic growth and environment in BRICS countries? A panel data analysis. Economics Bulletin,
(1), pp. 553–567
Bentum-Ennin (2019). Determinants and economic impact of international tourist arrivals in Ghana,
African Economic Research Consortium Policy Brief Number 580.
Blake A, Sinclair MT, Soria JAC (2006). Tourism productivity: evidence from the United Kingdom.
Annals of Tourism Research, 33(4), pp. 1099–1120
Boora, S.S. & Dhankar, S. (2017). Foreign direct investment and its impact upon the Indian hospitality
industry. African Journal of Hospitality, Tourism and Leisure, 6 (1), pp. 1-17.
Brida, J.G.; Cortes-Jimenez, I. & Pulina, M. (2016). Has the tourism-led growth hypothesis been
validated? A literature review. Current Issues Tourism, 19(5), pp. 394–430
Chen, H. (2010). Macroeconomic conditions and the puzzles of credit spreads and capital structure.
Journal of Finance, 65(6), pp. 2171-2212.
Cooray, A. (2010). Do stock markets lead to economic growth? Journal of Policy Modeling, 32(4), pp.
Croes, E. & Vanegas, S.M. (2008). Co-integration and causality between tourism and poverty
reduction. Journal of Travel Research, 47 (1), pp. 94-103.
Dhungel, K.R. (2015). An econometric analysis on the relationship between tourism and economic
growth: empirical evidence from Nepal. International Journal of Economics and Financial
Management, 3(2), pp. 84–90.
Ehigiamusoe, K.U. (2021). The nexus between tourism, financial development and economic growth:
Evidence from African countries. African Development Review, 33 (2), pp. 382-396.
Franks, J. & Mayer, C. (1990). Capital markets and corporate control: A study of France, Germany and
the UK. Economic Policy, 5(10), pp. 189-231
Gao, Q.; Liu, Y. ;Ayub, B. & Hussain, M. (2022). Does Health Crises Effect Tourism: Role of Financial
Inclusion for Green Financial Development. Front. Public Health 10:896894. Doi:
Gidebo, H.B. (2021). Factors determining international tourist flow to tourism destinations: A systemic
review. Journal of Hospitality Management and Tourism, 12 (1), pp. 9-17.
Gounopoulos, D.; Petmezas, D. & Santamaria, D. (2012). Forecasting tourist arrivals in Greece and the
impact of macroeconomic shocks from the countries of tourists’ origin. Annals of Tourism Research,
(2), pp. 641-666.
Habib, S.S.; Sharif, M.S. & Hossain, M.A. (2019). Nexus between economic growth, tourism revenue
and financial development in Bangladesh: A time series analysis. Business and Economic Research, 9
(3), pp. 134-149.
Hall, C. M. & Williams, A. (2008). Tourism and innovation. Routledge.
Hur, J.; Raj, M. & Riyanto, Y. E. (2006). Finance and trade: A cross-country empirical analysis on the
impact of financial development and asset tangibility on international trade. World Development,
(10), pp. 1728-1741.
Ibrahim, P.A. (2021). Exploring tourism opportunities: Role of financial institutions in the promotion
of tourism entrepreneurship in Kerala. ASEAN Journal on Hospitality and Tourism, 19 (2), pp. 86-100.
Im, K.S.; Pesaran, M. H. & Shin, Y. (2003). Testing unit roots in heterogeneous panels. Journal of
Econometrics, 115 (1), pp. 53-74.
Jamel, L. (2020). The relation between tourism and economic growth: A case of Saudi Arabia as an
emerging tourism destination. Virtual Economics, 3 (4), pp. 29-47.
John, K. & Nazif, D. (2021). Determinants of intra-SSA tourism demand. Munich Personal RePEc
Archive (MPRA) Paper Number 106492.
Kao, C. (1999). Spurious regression and residual-based tests for co-integration in panel data. Journal
of Econometrics, 90, pp. 247-259.
Kaufmann, D. ; Kraay, A. & Mastruzzi M. (2006). Governance Matters VI: Aggregate and Individual
Governance Indicators 1996-2006. Policy Research Working Paper No. 4280. World Bank,
Khanna, R. & Sharma, C. (2020). Does financial development raise tourism demand? A cross-country
panel evidence. Journal of hospitality and Tourism Research, 20 (10), pp. 1-31.
Liu, J.; Wang, M.; Yang, L.; Rahman, S. & Sriboonchitta, S. (2020). Agricultural productivity growth
and its determinants in South and Southeast Asian countries, Sustainability, 12 (2020), pp. 1-21.
Levin, A.; Lin, C.F. & Chu, C.S.J. (2002). Unit root tests in panel data: Asymptotic and finite-sample
properties. Journal of Econometrics, 108 (1), pp. 1-24.
Malec, L. & Abrham, J. (2016). Determinants of tourism industry in selected European countries: A
smooth partial least squares approach. Economic Research, 29 (1), pp. 66-84.
Marti, L. and Puertas, R. (2017). Determinants of tourist arrivals in European Mediterranean countries:
Analysis of competitiveness, European Journal of Tourism Research, 15 (2017), 131-142.
Melese, K. B. & Belda, T.H. (2021). Determinants of tourism product development in Southeast
Ethiopia: Marketing perspectives. Sustainability, 13, pp. 1-21.
Montes-Rojas, G. & Barroso, R. (2020). What are the empirical determinants of international tourist
arrivals and expenditures? An empirical application to the case of Sao Tome and Principe, World Bank
Group (Macroeconomics, Trade and Investment Global Practice) Working Paper Series Number 9189.
Nesti, N.O. (2018). Investigating the relationship between tourism, trade openness and financial
development to economic growth in six selected ASEAN countries, Universitas Andalas Diploma
Thesis in Social Sciences.
Nyasha, S. & Odhiambo, N.M. (2021). Determinants of tourism development: Empirical evidence from
three developing countries. International Economics, 74 (3), pp. 335-368.
Ohlan, R. (2017). The relationship between tourism, financial development and economic growth in
India. Future Business Journal, 3 (1), pp. 9-22.
Panahi, H. & Nasibparast, S. (2018). Determinants of tourism development in developing countries: A
Bayesian econometric approach. Geographical Journal of Tourism Space, 7 (26), pp. 43-58.
Pedak, M.O. (2018). The Effect of Tourism on GDP. A dissertation submitted to Jonkoping University.
Permatasari, M. M. & Esquivias, M. A. (2020). Determinants of tourism demand in Indonesia: A panel
data analysis, Tourism Analysis, 25, pp. 77-89.
Pervan, M. & Juric, E. (2021). Determinants of tourism demand in Croatia, International Journal of
Economics and Statistics, 9 (2021), pp. 102-107.
Puah, C.; Jong, M. & Arip, M. A. (2019). Determinants of tourism demand in Sarawak: An augmented
gravity model, Proceedings of the International Conference on Economics, 2019 (ICE 2019), pp. 150-
Rasool, H.; Maqbool, S. & Tarique, M. (2021). The relationship between tourism and economic growth
among BRICS countries: A panel co-integration analysis, Future Business Journal, 7 (1), pp.1-11.
Snieska, V. Barkauskiene, K. and Barkauskas, V. (2014). The impact of economic factors on the
development of rural tourism: Lithuanian case, Procedia -Social and Behavioral Sciences, 156, pp.
Stead, R. (1996). Foundation quantitative methods for business. Prentice Hall. England.
Tavares, R.V. (2020). Modelling the determinants of international tourism demand in Cabo Verde
Islands by European countries: A dynamic panel data econometric analysis, African Journal of
Hospitality, Tourism and Leisure, 9 (4), pp. 484-499.
Tsangari, H. (2012). Determinants of tourism for “sun and sea” Cyprus, European Research Studies
Journal, 15 (3), pp. 161-184.
Tembo, J. (2018). Regional financial integration and its impact on financial sector development: The
case of Southern Africa. Unpublished Doctoral Thesis. University of South Africa.
Tsaurai, K. (2018). The role of financial sector development in the tourism-growth nexus: A case of
Southern African countries. Journal of Economics and Behavioral Studies, 10 (3), pp. 100-110.
Wada, I. (2021). Institutional quality and tourism growth nexus in MENA countries. The Romanian
Economic Journal, 24 (81), pp. 3-14.
Williams, A. M. & Baláž, V. (2015). Tourism risk and uncertainty: Theoretical reflections. Journal of
Travel Research, 54(3), pp. 271-287
Xie, J. (2020). The economic determinants of tourism seasonality: A case study of the Norwegian
tourism industry. Cogent Business and Management, 7 (1), pp. 1-14.
Yenisehirlioglu, E. and Bayat, T. (2019). The relationship between tourism income and financial
development in the MENA countries. Journal of Business Research-TURK, 11 (2), pp. 1183-1190.
Copyright (c) 2022 Kunofiwa Tsaurai
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.