An Empirical Analysis of the Impact of Foreign Direct Investment on Tourism Development: The Mauritian Case

This article investigates the link between foreign direct investment (FDI) and tourism development for the case of the small island economy of Mauritius for the period 1980–2015. The research employs a dynamic time series econometrics framework, namely a vector error correction model (VECM), to account for potential dynamic and endogenous relationship in the FDI–tourism nexus. Analysis of the finding shows that FDI has a positive and significant effect, albeit relatively lower compared to the other classical factors of tourism development, in the long run. Interestingly, a bicausal effect is observed in the long run while an indirect link between FDI and tourism development via the economic growth channel is found.