The relationship between tourism, foreign direct investment and economic growth: evidence from Iran

Tourism is one of the world's largest industries and an increasingly important source of foreign currency that is used to finance economic growth. The purpose of this study is to examine the long-term and short-term relationships between tourism and economic growth in Iran, by using annual data covering the 1985-2013 period and autoregressive distributed lag and the Error Correction model to examine the relationships between variables. The findings showed that there is a positive relationship between tourism expenditure and economic growth in the long term and short term. The result indicate that there is also positive relationship between the real effective exchange rate (REER), foreign direct investment (FDI) and economic growth. The Granger causality test shows a bidirectional causality running between tourism expenditure and economic growth.