The interaction between foreign real estate investment and tourism: The Iranian case in Dubai

Abstract

The empirical relationship between the evolution of tourism and foreign real estate investment is established in the literature; however the direction of causality between these two variables is less clear. The purpose of this study is to empirically investigate the pattern of causality between foreign real estate investment and tourism, within the context of Iranian investment in Dubai real estate sector (IIDRE) and Iranian tourism in Dubai. By applying multivariate cointegration approach, the findings indicate that in the long-run the causation runs from tourism to IIDRE. It means that accumulation of Iranian knowledge about attractiveness of Dubai as a holiday destiny is an important factor explaining IIDRE. The results also suggest that there is a bidirectional short-run causal relationship between these variables. The results have some important implications for Iranian and Dubai policymakers.