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Tourism Demand in the Face of Geopolitical Risk: Insights From a Cross-Country Analysis

Lookup NU author(s): Dr Tasos Evgenidis

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This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0).

Abstract

© The Author(s) 2023.This paper develops a novel Bayesian heterogeneous panel vector autoregressive model (B-HP-VAR) that quantifies the impact of geopolitical risk shocks on the tourism industry of 14 emerging market and developing economies (EMDE). We find that increasing geopolitical tensions have a persistent negative effect on tourism demand in most of these countries, as shown by our impulse response estimates. Furthermore, evidence from forecast error variance decomposition reveals that geopolitical risk shocks in many EMDE economies constitute the main driver of tourism demand. Analysis from historical decompositions demonstrates that geopolitical tensions have been particularly influential in driving tourism demand in Ukraine, Russia, Turkey, China, Indonesia, Thailand, Colombia, and Mexico. Our main findings are robust to several perturbations to the benchmark specification. Our results have several important implications for policymakers in their efforts to strengthen the ability of the tourism industry to absorb shocks from geopolitical tensions.

Publication metadata

Author(s): Papagianni E, Evgenidis A, Tsagkanos A, Megalooikonomou V

Publication type: Article

Publication status: Published

Journal: Journal of Travel Research

Year: 2023

Volume: 63

Issue: 8

Pages: 2094-2119

Online publication date: 31/10/2023

Acceptance date: 02/04/2018

Date deposited: 05/04/2024

ISSN (print): 0047-2875

ISSN (electronic): 1552-6763

Publisher: Sage Publications Ltd

URL: https://doi.org/10.1177/00472875231206539

DOI: 10.1177/00472875231206539

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