Foreign Direct Investment in Tourism: Panel Data Analysis of D7 Countries

Abstract

This paper uses the panel data of foreign direct investment (FDI) and tourism development (TD) for Developed 7 (D7) countries from 1980 to 2012. Panel data analysis is used in order to analyze the causal relationship between foreign direct investment and tourism development. Conducted structural and diagnostic test results of the final model has proved that tourism development affected the foreign direct investment in D7. It is crucial to see the directions of causality between these two variables for the policy makers. The findings of this study have important implications in deciding tourism policy and it shows that this issue still deserves further attention in future research