The Stability of Interaction Channels Between Tourism and Financial Development in 10 Top Tourism Destinations; Evidence From a Fourier Toda Yamamoto Estimator

Our paper investigates the dynamic inter-linkages among financial development, tourism development and economic growth in the top ten tourism destination countries. The knowledge of which magnitude has a causal power on the other, can inform policy making about which country needs marketing support and additional investment for its tourism growth. Moreover, results will throw light on which countries are assisted by their ex-ante economic and financial development and can thus evolve into a tourism hub through the aid of the general economic development characterizing a country and /or a flourishing financial environment. Our study has employed a battery of co-integration and causality methods, which prove the robustness of our results. Specifically we rely on the augmented mean group estimator by Eberhardt and Teal (2010) and the novel causality mean group method, Fourier Toda-Yamamoto (Durusu-Ciftci et al., 2020), whose advantage lies in that it takes into account structural breaks and is resilient to cross-sectional dependence and auto-correlation as final estimation methods to draw conclusions from. The Fourier Toda-Yamamoto reveals that the tourism led growth hypothesis is confirmed for the USA, Italy, UK and Russia, while economic growth causes tourism development in the USA only. The financial development growth hypothesis in confirmed only for Spain and UK, while economic growth causes financial development in the USA, Italy, UK and Russia