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

Papagianni, Estela; Evgenidis, Anastasios; Tsagkanos, Athanasios; Megalooikonomou, Vasileios

Abstract

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.

Citation

Papagianni, E., Evgenidis, A., Tsagkanos, A., & Megalooikonomou, V. (2024). Tourism Demand in the Face of Geopolitical Risk: Insights From a Cross-Country Analysis. Journal of Travel Research, 63(8), 2094-2119. https://doi.org/10.1177/00472875231206539

• Journal Article Type: Article
• Online Publication Date: Oct 31, 2023
• Publication Date: Nov 1, 2024
• Deposit Date: Nov 12, 2023
• Publicly Available Date: Nov 12, 2023
• Journal: Journal of Travel Research
• Print ISSN: 0047-2875
• Electronic ISSN: 1552-6763
• Publisher: SAGE Publications
• Peer Reviewed: Peer Reviewed
• Volume: 63
• Issue: 8
• Pages: 2094-2119
• DOI: https://doi.org/10.1177/00472875231206539
• Keywords: tourism demand, geopolitical risk, panel VAR, impulse responses, macroeconomy
• Publisher URL: https://journals.sagepub.com/doi/10.1177/00472875231206539