Is Financial Development a Determinant of Tourism? A Case of Selected Emerging Markets

Authors

  • Kunofiwa Tsaurai University of South Africa

Keywords:

Emerging markets; Financial Development; Tourism; Panel Data

Abstract

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.

References

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,

https://doi.org/10.1080/23322039.2017.1379239.

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.

-460.

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:

3389/fpubh.2022.896894

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,

Washington: DC.

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.

-285.

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.

Downloads

Published

2022-09-16

Issue

Section

Business Administration and Business Economics