The Nexus Between Economic Freedom and Tourist Arrivals: Evidence from Mediterranean Countries

Year 2020, Volume: 70 Issue: 2, 287 - 301, 31.12.2020

Oğuz Öcal , Buket Altinoz , Alper Aslan

https://doi.org/10.26650/ISTJECON2020-825490

Abstract

Mediterranean countries are indispensable places of tourism with their world-famous shores, wonderful climate and impressive historical places. The aim of this paper is to investigate the relationship between tourist arrivals and economic freedom indicators such as government integrity, tax burden, government spending, business freedom and trade freedom. For this purpose, the panel vector autoregression (PVAR) method was used for a Mediterranean countries sample covering the period from 1996 to 2016. The results of causality testing showed that the tourist arrivals have a bidirectional causality relationship with each explanatory variable, while the coefficient estimates showed that an increase in economic freedom indices affected tourist arrivals negatively in Mediterranean countries. That is, economic freedoms do not mean an advantage for tourists without supportive public policies for tourism. The test results suggest that policymakers should take into account the various aspects of the tourism sector, particularly natural resources and environmental factors, while making policies that increase economic freedom in Mediterranean countries

Keywords

Tourism, conomic freedom, Panel VAR, Causality

The Nexus Between Economic Freedom and Tourist Arrivals: Evidence from Mediterranean Countries

Abstract

Mediterranean countries are indispensable places of tourism with their world-famous shores, wonderful climate and impressive historical places. The aim of this paper is to investigate the relationship between tourist arrivals and economic freedom indicators such as government integrity, tax burden, government spending, business freedom and trade freedom. For this purpose, the panel vector autoregression (PVAR) method was used for a Mediterranean countries sample covering the period from 1996 to 2016. The results of causality testing showed that the tourist arrivals have a bidirectional causality relationship with each explanatory variable, while the coefficient estimates showed that an increase in economic freedom indices affected tourist arrivals negatively in Mediterranean countries. That is, economic freedoms do not mean an advantage for tourists without supportive public policies for tourism. The test results suggest that policymakers should take into account the various aspects of the tourism sector, particularly natural resources and environmental factors, while making policies that increase economic freedom in Mediterranean countries

Keywords

Tourism, Economic Freedom, Panel Var, Causality

References

• Abrigo, M. R. M. & Love, I. (2015). Estimation of panel vector autoregressive in stata: A package of programs. Retrieved from http://paneldataconference2015.ceu.hu/Program/Michael-Abrigo.pdf.
• Aslan, A. (2014). Tourism development and economic growth in the Mediterranean countries: Evidence from panel Granger causality tests. Current issues in tourism, 17(4), 363-372. https://doi.org/10.1080/13683500.2013.768607
• Aslan, A. (2016). Does tourism cause growth: evidence from Turkey. Current issues in tourism, 19(12), 1176-1184. https://doi.org/10.1080/13683500.2015.1015970
• Canova, C., Ciccarelli, M. (2013). Panel vector autoregressive models: A survey. European central bank working paper series, No: 1507. Retrieved from https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1507.pdf.
• Enders, W. (1995). Applied econometrics time series. New York: Johnwiley and Song Inc. Gholipour, H. F., Tajaddini, R., & Al-Mulali, R. (2014). Does personal freedom influence outbound tourism? Tourism management, 41, 19-25. https://doi.org/10.1016/j.tourman.2013.08.010
• Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 37(3), 424-438. Retrieved from https://www.jstor.org/stable/1912791?seq=15#metadata_info_tab_contents
• Im, K. S., Pesaran, M. & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of econometrics, 115(1), 53-74. https://doi.org/10.1016/S0304-4076(03)00092-7
• Kubickova, M. (2016). The role of government in tourism: Linking competitiveness, freedom, and developing economies. Czech journal of tourism, 5(2), 79-92. http://doi.org/10.1515/cjot-2016-0005
• Lean, H. H., Chong, S. H., & Hooy, C. W. (2014). Tourism and economic growth: Comparing Malaysia and Singapore. International journal of economics and management, 8(1), 139-157. Retrieved from file:///C:/Users/Casper/Downloads/IJEM2014-hooi-tourism.pdf
• Levin, A., C.-F. Lin, and C.-S. J. Chu. 2002. Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108, 1–24.
• Özcan, C. C., Aslan, M., & Nazlıoğlu, S. (2017). Economic freedom, economic growth and international tourism for post-communist (transition) countries: A panel causality analysis. Theoretical and applied economics, 24(2), 75-98. Retrieved from http://store.ectap.ro/articole/1270.pdf
• Saha, S., Su, J-J., & Campbell, N. (2017). Does political and economic freedom matter for inbound tourism? A cross-national panel data estimation. Journal of travel research, 56(2). https://doi.org/10.1177/0047287515627028
• Samimi, A. J., Sadeghi, S., & Sadeghi, S. (2011). Tourism and economic growth in developing countries: P-VAR approach. Middle-East journal of scientific research, 10(1), 28-32. Retrieved from http://www.idosi.org/mejsr/mejsr10(1)11/5.pdf