Modelling The Role of Institutional Change In A Tourism Growth Model: A Dynamic Analysis

Isah Wada

doi:10.36923/iefrontiers.v27i2.250

Open Access Article Macroeconomics

Isah Wada ⁽¹⁾

(1) Department of economics, Faculty of economics and administrative sciences Cyprus International University, Turkey

https://doi.org/10.36923/iefrontiers.v27i2.250

Issue
Vol. 27 No. 2 (2024): Continuous

Submitted
June 1, 2024

Published
August 24, 2024

Keywords:

Autoregressive Distributed Lag (ARDL), Dynamic panel, Financial development, Institutional change, Tourism, Pool mean group, UNSDG Goal 16

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Abstract

This study aims to investigate the dynamic relationships among foreign direct investment (FDI), financial development, tourism development, and institutional quality in selected MENA countries. The research focuses on assessing the significance of institutional quality within these interlinked dynamics and its impact on the variables under consideration. The study's objective aligns with UNSDG Goal 16, which aims to promote peaceful and inclusive societies with strong institutions that support economic growth and development. The study employs a novel panel Autoregressive Distributed Lag (ARDL) estimation approach to analyze empirical data from 2002 to 2018. This method allows for a comprehensive examination of both short-run and long-run interactions among FDI inflows, financial development, tourism development, and institutional quality across multiple countries in the MENA region. The empirical results indicate that, in the long run, institutional quality negatively influences FDI inflows, financial development, and international tourist arrivals, while it positively impacts real GDP. In the short run, financial development was found to negatively affect real GDP, and international tourist arrivals were observed to negatively impact financial development. Additionally, institutional quality exhibited a negative effect on international tourist arrivals in the short run. Country-wise regression results showed that institutional quality positively influenced international tourist arrivals, FDI inflows, real GDP, and financial development. Furthermore, the study identifies significant unidirectional causal relationships, highlighting the pivotal role of institutional quality in economic growth and development. The study concludes that institutional quality plays a critical role in shaping the dynamics of FDI, financial development, and tourism growth. While institutional quality has a positive impact on long-term economic growth, its negative effects on FDI, financial development, and tourism in the short run suggest the need for improved governance and policy interventions.

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Authors

Isah Wada

Department of economics, Faculty of economics and administrative sciences Cyprus International University

https://orcid.org/0000-0002-8164-5649

iwada@ciu.edu.tr (Primary Contact)

Wada, I. (2024). Modelling The Role of Institutional Change In A Tourism Growth Model: A Dynamic Analysis . Innovation Economics Frontiers, 27(2), 71–85. https://doi.org/10.36923/iefrontiers.v27i2.250

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