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Causality between Foreign Direct Investment and Tourism : Empirical Evidence from India


  • Saroja Selvanathan


  • E.A. Selvanathan
  • Brinda Viswanathan


This paper investigates the causal link between foreign direct investment and tourism in India by employing the Granger causality test under a VAR framework. A one-way causality link is found from foreign direct investment to tourism in India. This evidence once again adds to the need for appropriate policies and plans to further expand and develop tourism given that FDI flow into India is expected to be strong in the coming years, bringing along a demand for tourism as well.

Suggested Citation

  • Saroja Selvanathan & E.A. Selvanathan & Brinda Viswanathan, 2009. "Causality between Foreign Direct Investment and Tourism : Empirical Evidence from India," Finance Working Papers 22944, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:financ:22944

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    References listed on IDEAS

    1. Toda, Hiro Y & Phillips, Peter C B, 1993. "Vector Autoregressions and Causality," Econometrica, Econometric Society, vol. 61(6), pages 1367-1393, November.
    2. Kundu, Sumit K. & Contractor, Farok J., 1999. "Country location choices of service multinationals: An empirical study of the international hotel sector," Journal of International Management, Elsevier, vol. 5(4), pages 299-317.
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    Cited by:

    1. Ahmad Jafari Samimi & Somaye Sadeghi & Soraya Sadeghi, 2013. "The Relationship between Foreign Direct Investment and Tourism Development: Evidence from Developing Countries," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 5(2), pages 59-68, July.

    More about this item


    FDI; Tourism; Granger Causality;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models


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