Tourism and Financial Development: Granger Causality Analysis on Mediterranean Countries with a Panel Data Approach

Tourism has increasingly become one of the key drivers of economic growth and foreign exchange earnings for developing economies. The relationship between financial development and tourism has attracted growing academic interest, particularly in recent years. This study aims to examine the causal relationship between financial development and tourism indicators in Mediterranean countries. To this end, a panel dataset for 13 Mediterranean countries covering the period 1995–2020 was constructed using annual data. The variables selected for this study include the number of international tourists, tourism revenues, tourism expenditures, and the financial development index. In this study, the cross-sectional dependence of the data and heterogeneity at the country level were taken into account, and the Kónya bootstrap panel causality approach was chosen. The findings of this study indicate a bidirectional causal relationship between financial development and tourism revenues at the panel level; however, despite country-specific relationships, no significant causal relationship was found across the panel as a whole for tourist receipts or tourism expenditures. The results of the study indicate that the tourism–financial development relationship must be analyzed in light of country-specific dynamics. In this regard, the study contributes to the existing literature through its multidimensional examination of tourism indicators and country-specific causality analysis, thereby providing valuable policy implications for Mediterranean countries.