IDEAS home Printed from https://ideas.repec.org/p/afa/wpaper/2216.html

Tourism and Financial Development in South Africa: A Trivariate Approach

Author

Listed:
  • M.T. Musakwa

    (University of South Africa)

  • N.M. Odhiambo

    (University of South Africa)

Abstract

In this study, we examine the causal relationship between tourism and financial development in South Africa using data from 1995 to 2017. The study attempts to establish if financial development Granger-cause tourism in South Africa? Autoregressive distributed lag (ARDL) bounds testing approach and ECM-based Granger causality test were used to examine the link. When broad money was used as a proxy for financial development, a unidirectional causality from tourism to financial development was found in the short and the long run. However, when domestic credit provided by financial sector and market capitalisation of domestic listed companies were used as proxies, a bidirectional causal effect was confirmed in the short run and a unidirectional causal relationship from financial development to tourism in the long run. The results confirm the reinforcing effect between tourism and financial development in the short run with financial development taking the centre stage in the long run.

Suggested Citation

  • M.T. Musakwa & N.M. Odhiambo, 2022. "Tourism and Financial Development in South Africa: A Trivariate Approach," Working Papers 2216, African Economic and Social Research Institute (AESRI).
    • Handle: RePEc:afa:wpaper:2216
    as

    Download full text from publisher

    File URL: https://aesri.org/RePEc/afa/afa-wpaper/AESRI-2216-Final.pdf
    File Function: Revised version, 2026
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Muhammad Shahbaz & Ramzi Benkraiem & Anthony Miloudi & Aviral Kumar Tiwari, 2019. "Tourism-induced financial development in Malaysia: New evidence from the tourism development index," Tourism Economics, , vol. 25(5), pages 757-778, August.
    2. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    3. Nicholas Odhiambo, 2009. "Interest Rate Liberalization and Economic Growth in Zambia: A Dynamic Linkage," African Development Review, African Development Bank, vol. 21(3), pages 541-557.
    4. Başarir, Çağatay & Çakir, Yasin Nuri, 2015. "Causal Interactions Between CO2 Emissions, Financial Development, Energy and Tourism," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(11), pages 1227-1238.
    5. Narayan, Paresh Kumar & Smyth, Russell, 2008. "Energy consumption and real GDP in G7 countries: New evidence from panel cointegration with structural breaks," Energy Economics, Elsevier, vol. 30(5), pages 2331-2341, September.
    6. John Loizides & George Vamvoukas, 2005. "Government Expenditure and Economic Growth: Evidence from Trivariate Causality Testing," Journal of Applied Economics, Taylor & Francis Journals, vol. 8(1), pages 125-152, May.
    7. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    8. Çağatay Başarir & Yasin Nuri Çakir, 2015. "Causal Interactions Between Co2 Emissions, Financial Development, Energy and Tourism," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(11), pages 1227-1238, November.
    9. Solarin, Sakiru Adebola & Shahbaz, Muhammad, 2013. "Trivariate causality between economic growth, urbanisation and electricity consumption in Angola: Cointegration and causality analysis," Energy Policy, Elsevier, vol. 60(C), pages 876-884.
    10. Sheilla Nyasha & Nicholas M. Odhiambo, 2015. "The Impact of Banks and Stock Market Development on Economic Growth in South Africa: an ARDL-bounds Testing Approach," Contemporary Economics, Vizja University, vol. 9(1), March.
    11. Khan, Muhammad Tariq Iqbal & Yaseen, Muhammad Rizwan & Ali, Qamar, 2019. "Nexus between financial development, tourism, renewable energy, and greenhouse gas emission in high-income countries: A continent-wise analysis," Energy Economics, Elsevier, vol. 83(C), pages 293-310.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Pat Obi & Kwaku Addae-Ankrah & Emmanuel Sarpong-Kumankoma, 2025. "Do Financial Development and Exchange Rates Drive the Tourism–Growth Relationship?," IJFS, MDPI, vol. 13(2), pages 1-22, April.
    3. He, Qiao & Xie, Henglang & Zhu, Yichang & Huang, Lingyu, 2024. "The impact of natural resource, information and communication technology adoption, and economic expansion on financial development in post COVID era," Resources Policy, Elsevier, vol. 89(C).
    4. Alejandro Alcalá-Ordóñez & Verónica Segarra, 2025. "Tourism and economic development: A literature review to highlight main empirical findings," Tourism Economics, , vol. 31(1), pages 76-103, February.
    5. Ssekitoleko Patrick & Manaliyo Jean Claude, 2024. "Investigating the Effects of Advancements in Information and Communication Technology and Financial Development on Tourism Growth: A Case of South Africa," Folia Oeconomica Stetinensia, Paradigm, vol. 24(2), pages 304-326.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Odhiambo, Nicholas M. & Nyasha, Shiella, 2018. "Oil prices and economic growth in Kenya: A trivariate simulation," Working Papers 24411, University of South Africa, Department of Economics.
    2. Sheilla Nyasha & Yvonne Gwenhure & Nicholas M. Odhiambo, 2017. "The Dynamic Causal Linkage Between Financial Development And Economic Growth: Empirical Evidence From Ethiopia," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 70(1), pages 73-102.
    3. Arletta Isaeva & Raufhon Salahodjaev & Anastas Khachaturov & Shakhnoza Tosheva, 2022. "The Impact of Tourism and Financial Development on Energy Consumption and Carbon Dioxide Emission: Evidence from Post-communist Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(1), pages 773-786, March.
    4. Sheilla Nyasha & Yvonne Gwenhure & Nicholas M Odhiambo, 2018. "Energy consumption and economic growth in Ethiopia: A dynamic causal linkage," Energy & Environment, , vol. 29(8), pages 1393-1412, December.
    5. M.T. Magombeyi & N.M. Odhiambo, 2017. "Causal relationship between FDI and poverty reduction in South Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1357901-135, January.
    6. Muthana Mohammad Omoush, 2018. "Time Series Analysis among Tourism, Financial Development, FDI and Economic Growth in Jordan," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(12), pages 150-150, December.
    7. Magombeyi, Mercy T & Odhiambo, Nicholas M, 2017. "FDI and poverty reduction in Botswana: A multivariate causality test," Working Papers 22656, University of South Africa, Department of Economics.
    8. Eléazar Zerbo, 2017. "Energy consumption and economic growth in Sub-Saharan African countries: Further evidence," Economics Bulletin, AccessEcon, vol. 37(3), pages 1720-1744.
    9. Nicholas Odhiambo, 2015. "Government Expenditure and Economic Growth in South Africa: an Empirical Investigation," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(3), pages 393-406, September.
    10. Muhammad Shahbaz & Ramzi Benkraiem & Anthony Miloudi & Aviral Kumar Tiwari, 2019. "Tourism-induced financial development in Malaysia: New evidence from the tourism development index," Tourism Economics, , vol. 25(5), pages 757-778, August.
    11. repec:afa:wpaper:aesri-2022-15 is not listed on IDEAS
    12. repec:afa:wpaper:aesriwp15 is not listed on IDEAS
    13. Magombeyi, Mercy T & Odhiambo, Nicholas M, 2017. "Foreign direct investment and the poverty reduction nexus in Tanzania," Working Papers 22775, University of South Africa, Department of Economics.
    14. Musakwa, Mercy T & Odhiambo, Nicholas M, 2022. "Does tourism influence financial development in Kenya?," Working Papers 29228, University of South Africa, Department of Economics.
    15. Caraiani, Chirața & Lungu, Camelia I. & Dascălu, Cornelia, 2015. "Energy consumption and GDP causality: A three-step analysis for emerging European countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 44(C), pages 198-210.
    16. Nyasha, Sheilla & Odhiambo, Nicholas M., 2016. "Financial intermediaries, capital markets, and economic growth: empirical evidence from six countries," Working Papers 19908, University of South Africa, Department of Economics.
    17. Ahmad, Ashfaq & Zhao, Yuhuan & Shahbaz, Muhammad & Bano, Sadia & Zhang, Zhonghua & Wang, Song & Liu, Ya, 2016. "Carbon emissions, energy consumption and economic growth: An aggregate and disaggregate analysis of the Indian economy," Energy Policy, Elsevier, vol. 96(C), pages 131-143.
    18. Verónica Cañal-Fernández & Julio Tascón Fernández, 2018. "The long run impact of foreign direct investment, exports, imports and GDP: evidence for Spain from an ARDL approach," Working Papers 0128, European Historical Economics Society (EHES).
    19. Ulrich Witt & Christian Gross, 2020. "The rise of the “service economy” in the second half of the twentieth century and its energetic contingencies," Journal of Evolutionary Economics, Springer, vol. 30(2), pages 231-246, April.
    20. Destek, Mehmet Akif, 2016. "Renewable energy consumption and economic growth in newly industrialized countries: Evidence from asymmetric causality test," Renewable Energy, Elsevier, vol. 95(C), pages 478-484.
    21. Ozturk, Ilhan & Acaravci, Ali, 2010. "The causal relationship between energy consumption and GDP in Albania, Bulgaria, Hungary and Romania: Evidence from ARDL bound testing approach," Applied Energy, Elsevier, vol. 87(6), pages 1938-1943, June.
    22. Ahmed, Khalid, 2015. "The sheer scale of China’s urban renewal and CO2 emissions: Multiple structural breaks, long-run relationship and short-run dynamics," MPRA Paper 71035, University Library of Munich, Germany.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • Z3 - Other Special Topics - - Tourism Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:afa:wpaper:2216. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Prof Nicholas M Odhiambo (email available below). General contact details of provider: https://aesri.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.