Environmental Degradation, Renewable Energy, Technological Innovation, and Foreign Direct Investment as Determinants of Tourism Development in Tunisia: An Autoregressive Distributed Lag–Fully Modified Ordinary Least Squares Analysis

Oussama Zaghdoud ()
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Oussama Zaghdoud: Department of Economics, College of Business Administration, King Faisal University, Al-Ahsa 31982, Saudi Arabia

Economies, 2025, vol. 13, issue 11, 1-25

Abstract: This study examines how tourism development in Tunisia responds to environmental degradation, renewable energy consumption, technological innovation, and foreign direct investment. Using annual data for 1990–2023, we apply the Autoregressive Distributed Lag (ARDL) bounds approach to identify long-run equilibria and short-run dynamics and validate the results with Fully Modified Ordinary Least Squares (FMOLS). The bounds tests confirm stable long-run relationships among tourism development and its structural determinants—environmental degradation, renewable energy, technological innovation, and foreign direct investment. The empirical results show that environmental degradation depresses tourism development in the long run, whereas renewable energy and technological innovation promote it. Foreign direct investment provides the strongest positive contribution. Complimentary Granger causality tests confirm unidirectional causality from environmental degradation, renewable energy, and technological innovation to tourism development, and bidirectional causality between tourism and foreign direct investment, validating the robustness and direction of influences among variables. Short-run effects appear weaker and occasionally mixed; however, the negative and highly significant error-correction term indicates convergence toward equilibrium. The FMOLS estimates closely match the ARDL results, providing further confidence in the results. Accordingly, policymakers should bolster environmental management, increase renewable energy as part of tourism infrastructure, advance digital and eco-innovation, and attract FDI in cleaner technologies and higher standards of services. This study fills conceptual and regional evidence gaps by integrating environmental, technological, and financial dimensions within a unified framework. It offers practical guidance consistent with the Sustainable Development Goals; specifically, Goals 7 (clean energy), 8 (sustainable growth and jobs), and 13 (climate action).

Keywords: tourism development; environmental degradation; renewable energy; techno logical innovation; FDI; sustainability transition; ARDL-FMOLS cointegration methods; Tunisia (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2025
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