The Role Of Investments On The Growth Of Tourism Revenues: Evidence From An Emerging Economy

Abstract

The purpose of this research is to assess whether and to what extent the growth in the Jordanian economy responds to the increase in foreign direct investment (FDI) and local investment (LI) through tourism revenue over the period that ranges from 1995 to 2019. The study implements the Autoregressive Distributed Lag (ARDL) methodology to examine both the short-run and long-run impacts. The research findings confirm the long-run relationship between tourist revenues and FDI, LI, and the other determinants. In the long-run, contrary to expectations, LI has a negative and significant impact on tourism revenue, while FDI exerts an insignificant impact on tourism revenue. The short-run results also show that LI has a significant and negative impact on tourism revenue, whereas the impact of one period lag of FDI on tourism revenue is negative and significant at the 10% level. Originality: First, to the best of our knowledge, this is the first study that examines the extent to which both foreign direct investment and local investments impact economic growth through tourism revenue. Second, this research examines both the long-run and short-run impacts. Finally, contrary to previous research, this paper controls for economic freedom and the country’s level of openness as factors that are important in the relationship between FDI, LI, and tourism revenue.