Abstract. This paper examines the causal relationship between economic freedom and foreign tourist arrivals for 17 post-socialist transition countries during the period from 1996 to 2012. We employ the recently introduced panel Granger causality approach that is flexible enough to take account of both cross-country correlation and heterogeneity across the countries. The empirical results support the evidence on (i) the neutrality between economic freedom-economic growth and between economic growth-international tourism with few exceptions and (ii) the causality from economic freedom to tourism in six out of seventeen transition economies. Post-socialist countries are still in the process of integrating into the market economic system and also the global system; and consequently, the results of the current study are heavily shaped by the historical backgrounds and also the infancy of the transition process of these nations.

Keywords: economic freedom, foreign tourism, economic growth, transition countries, panel causality.