Purpose – The purpose of this paper is to study the direction of the causality between tourism development and economic growth in Lebanon between 1995 and 2013, after taking into consideration terrorist incidents and their intensities. These are considered as exogenous shocks that affect tourism development and economic growth instantaneously and with a lag. Design/methodology/approach – To reach the objectives, the authors estimate a vector auto regressive model with exogenous variables, applying a series of unit root tests with and without structural breaks and the Granger causality test. Findings – The findings suggest a positive unidirectional causality running from tourism development to economic growth in the short run. Thus, the authors find evidence for the tourism-led growth hypothesis (TLGH) in Lebanon despite the exposure of the country to frequent terrorist incidents. The impulse response functions reveal that tourism development (economic growth) responds positively to a positive shock to economic growth (tourism development). Practical implications – The findings call for Lebanese policy makers aiming at promoting growth to design policies that encourage tourism, such as implementing tourism marketing policies and building the needed tourism infrastructure. Such policies will have positive but transitory effects on economic growth. The findings may also be useful for regional representatives of intergovernmental organizations and the offices of statistics of United Nations World Tourism Organization and the World Bank to better understand the tourism industry in Lebanon and similar countries suffering from instabilities. Originality/value – This paper contributes to the existing literature in three points: despite the importance of the tourism industry to the Lebanese economy, this topic did not receive careful attention in the literature; it takes into consideration the presence of structural breaks and possible nonlinearities in the number of tourist arrivals; and it investigates the TLGH after accounting for instability in the country.
In this article we investigate the link between fluctuations in tourist arrivals (total, Arabs, Europeans) to Lebanon and terrorism in Lebanon on one hand, and the Syrian civil war on the other hand. This is done by estimating a set of models from the GARCH(1,1) family. Hence, in this article we attempt to model the conditional mean and conditional variance of the logarithm of monthly tourist arrivals to Lebanon between January 1995 and December 2014. The results reveal a significant negative marginal effect for terrorism on tourism demand. Moreover, terrorism is found to have a negative impact on the volatility of total international arrivals and Arab arrivals, but a positive impact on the volatility of European arrivals. Hence, terrorism reduces fluctuations in tourist arrivals in the first two cases, but increases fluctuations in the third case. However, terrorism has a transitory effect on the Lebanese tourism sector while the Syrian civil war has a permanent effect. In fact, during the Syrian civil war the volatility of the Lebanese tourism demand decreased.
Foreign direct investment (FDI) is an important determinant of economic growth. A wealth of literature has tackled its determinants; however few investigated the effect of political risk on FDI. Consequently, this study examines 12 ICRG political risk indicators, after removing multicollinearity and grouping them into three categories, to test the nature of this relation in the case of Lebanon over the period 2008-2018. The findings provide evidence of significant causality between all political risk factors and FDI inflows. Other determinants like “Infrastructure”, “Inflation”, “Trade Openness” and “Wage Rates” have insignificant effects.
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