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Using the Panel Cointegration Approach to Analyse the Determinants of Tourism Demand in South Africa

Estimating tourism demand has become a challenge among researchers, as identification of key determinants is important for policymakers at a time when tourism has become the worlds largest industry. Using a theoretical framework based on the gravity model, this paper models inbound tourism demand for South Africa to estimate price and income sensitivities as well as the impact of other important factors that affect tourist flows, such as the location of markets and socio-political factors. Given the non-stationary but cointegrated nature of the panel data, panel cointegration estimation techniques are employed. The results show that tourists are sensitive to price changes in South Africa and also to tourism price changes in competing destinations. The level of development, tourism infrastructure, distance (or transportation costs), common border and language are also found to affect arrivals. The results also indicate the need to conduct estimation by regional groupings for a better understanding of different markets.

The determinants of FDI in Mauritius: a dynamic time series investigation

Purpose – The purpose of this paper is to supplement the literature on the determinants of foreign direct investment (FDI) by bringing new evidences for the case of a successful FDI recipient country in Africa, namely Mauritius.Design/methodology/approach – The determinants of FDI are examined by specifying a reduced‐form specification for a demand for inward direct investment function, and by making use of a dynamic framework. In the absence of cointegration, a differenced vector autoregressive (DVAR) model is used to capture the short‐run dynamics of the growth rate of the different specified variables.Findings – The most instrumental factors appear to be trade openness, wages and the quality of labour in the country. Size of the market is reported to have a relatively lesser impact on FDI, probably related to the limited size of the population and the domestic market on the one hand and the good export opportunities from Mauritius on the other. The significant coefficient of the lagged dependent variab...

The economic importance of education: Evidence from Africa using dynamic panel data analysis

The existing literature has dealt inadequately with the link between education and economic growth in developing countries, particularly for Africa which has experienced a massive growth of enrolment at all levels of education during the second half of the 20th century. Moreover, the issues of causality and dynamics have been largely ignored until lately. This paper investigates the empirical link between education and economic performance for the case of 40 African States for the time period 1980–2000 using both static and dynamic panel data analysis. Result from the analysis shows that education has been an instrumental element in the growth process, though to a lesser extent as compared to recent empirical works. The study also confirms the presence of dynamics in the education-growth debate and is in line with recent findings from other developing country cases.

Financial development and economic growth: an ARDL approach for the case of the small island state of Mauritius

The article investigates the dynamic empirical link between financial development and economic performance for the case of the developing small island state of Mauritius using a unique time-series data set over the period 1952 to 2004. The analysis was performed using two different proxies for financial development in an ARDL framework. The results suggest that financial development have been contributing to the output level of the economy in both short and long run. It thus highlights the economic importance of financial development and provides new evidence for the case of island economies using recent cointegration approach.

Research Note: Does Transport Infrastructure Matter in Overall Tourism Development? Evidence from a Sample of Island Economies:

This paper focuses on investigating the importance of transportation infrastructure in the overall attractiveness of a destination. It extends a classical demand for international tourism function to include transport infrastructure, as measured by proxies of land and air transport, as additional and separate inputs in a panel data framework for the case of island economies. Due to the possibility of reputation effects in tourism, the study also employs dynamic panel data estimates for a sample of island economies. Results from the analysis show tourists are sensitive to both types of transport infrastructure. Disaggregated studies further show that this is more pronounced for top and renowned island destination cases. The study also confirms the existence of persistence effects and repeat tourism for the latter destinations.

An Analysis of the Relationship between Transport Capital and Tourism Development in a Dynamic Framework

This paper investigates the contribution of transportation capital, an often neglected element in the overall attractiveness of Mauritius as a tourist destination. To gauge its effect, the study extends a classical demand for international tourism function to include a proxy of transport infrastructure. Accounting for the possibility of endogeneity and dynamism in tourism modelling, cointegration analysis in a vector autoregressive model is employed to assess the hypothesized link. Results from the analysis show that the stock of transport capital has contributed positively to the number of tourist arrivals in both the short run and the long run. The study thus highlights the importance of transport capital in adding to the value of tourism service and experience.

The Impact of Long Haul Destinations on Carbon Emissions: The Case of Mauritius

With the continual increase in tourism and travel activities globally, there are serious allegations that the industry is significantly contributing towards climate change through its impact on CO2 emissions. There are, to date, no empirical studies investigating the relation between tourism development and carbon emissions, which are debated to cause climatic changes. This article studies the impact that tourism and travel has on climate change for the case of Mauritius, a long-haul tourist destination. Assessing climatic change requires a significant amount of data over time. However, in the short term, the impact and contribution of tourism and travel-related activities on CO2 emissions can be assessed given that time series data are available. Using an autoregressive distributive lag approach, we specifically examine the dynamic relationship between tourism activities and carbon dioxide emissions as a proxy of environmental degradation using data from the period 1978–2011. The estimated long-run and short-run parameters revealed that an increase in tourist arrivals has significantly and positively affected CO2 emissions. This implies that the tourism and travel industry will have to adopt cleaner technologies to reduce CO2 emissions to avoid climatic changes.

Marketing Promotion Financing and Tourism Development: The Case of Mauritius

The benefits of tourism are widely acknowledged in the literature given the prevalence of its potential towards stimulating economic growth through the development of the domestic industry associated to the tourism sector, the stimulation of the provision of basic infrastructure, and the transfer of necessary technology via inward foreign direct investment. However, whilst the literature is fraught with studies on the determinants of tourism development in the literature, tourism promotion efforts, on the other hand, as an ingredient of tourism demand, have been overwhelmingly neglected by academic researchers. Moreover, the very few studies that could be traced focused exclusively on developed-country cases. As such, the present article attempts to supplement the small amount of literature on tourism-promotion impact for small island states through an assessment of the impact of tourism promotion efforts on tourist arrivals for Mauritius using an autoregressive distributed lag model approach. After controlling for the classical determinants of tourism demand, our analysis interestingly reveals that tourism marketing and promotion is a crucial element for attracting tourists to Mauritius, albeit to a lesser extent than some of the classical ingredients of the tourism equation.

Foreign direct investment and welfare nexus in sub Saharan Africa

Governments of developing countries have been targeting poverty alleviation and deprivation as their main goal and thus have been working for pro poor growth. It is observed that African countries need considerable amount of investment in order to help their economies to prosper. African countries can benefit from growth through foreign investment which is seen as an important source of capital flows. However, even if growth is important for an economy, it is not a good indicator of social development. Welfare can be worsen if growth attained by a country is not pro poor and can also result in an increase in inequality gap. In this regards, this study is based on the investigation on FDI and poverty alleviation or welfare maximization in selected Sub Saharan African countries. The present paper takes a different approach in analyzing the impact of FDI on poverty reduction. In the context of selected Sub Saharan African countries and over the period 1990-2010, a dynamic Panel vector error correction model is adopted. In effect the Vector autoregressive model or the vector error correction model is of great importance in showing the dynamic behavior of economic time series and for forecasting. Also, it often provides better forecasts and describes theory-based simultaneous equations models. Thus, given the endogeneity and causality issues, using such a model can prove to be highly beneficial. The main variables used are FDI net inflows and poverty headcount index. Other variables used in this study include the unemployment rate, inflation, openness, government debt and government expenditure, education level and GDP per capita. The results suggest that indeed FDI is an efficient tool in fighting poverty both in the short run and long run with the sample of countries considered. Moreover, the results favor a uni directional relationship between FDI and social welfare (poverty reduction) and a bi directional causality between FDI and economic welfare (Economic growth). According to this study, foreign investment is an important ingredient for both economic and social development for Sub Saharan African countries. Hence, the government should devise appropriate policies to attract such capital flows. These can be in terms of an improvement in institutional capacity and easier administrative procedures which would surely favor the entrance of foreign firms in the host countries.

Productivity Spillovers of FDI in the Manufacturing Sector of Mauritius. Evidence from A Dynamic Framework

Using a dynamic vector error correction model, catering for dynamic, endogeneity and causality issues, the present study addresses the important question of whether foreign direct investment in the manufacturing sector enhances the productivity of the sector in Mauritius using time series data for the period 1980-2010. The results show that FDI in the manufacturing sector has indeed contributed to both total factor productivity and labour productivity in the long run. Analysing the short run results, we found that FDI in the manufacturing sector continues to influence productivity but the impact is very small. This result was mainly explained by the massive relocation of foreign firms from Mauritius to cheap labour destinations. Also, the results confirm the presence of bi-causality and feedback effects in the FDI-Productivity relationship. Moreover, it also shows that FDI is positively related to the level of domestic investment suggesting the presence of “crowding in” effect as well.