Tourism and economic growth nexus revisited: A panel causality analysis for the case of the Mediterranean Region

• Panel unit root and cross-sectional dependence techniques were employed
• Causal relationship between tourism and economic growth was tested
• Bi-directional causality found for tourism receipts and economic growth in Europe
• Bi-directional causality found for tourism expenditures and economic growth in Asia
• No causality found between tourism and economic growth in Africa

Tourism is perceived as an important source of foreign exchange that is used for financing economic growth. This study offers a modern approach to tourism-led growth and investigates the causal relationship between tourism and economic growth in the European, Asian and African countries that border the Mediterranean Sea. The study uses panel data for the period 1998–2011, and adopts a panel Granger causality analysis developed by Dumitrescu and Hurlin (2012) to assess the contribution tourism makes to economic growth in each country. The results indicate that the direction of causality between tourism and economic growth depends on the country group and tourism indicator. Furthermore, the European countries are better able to generate growth from tourism in the Mediterranean region.