Time-varying impact of economic policy uncertainty and geopolitical risk on tourist arrivals: Evidence from a developing country

Although the relationship between uncertainties and tourism has been widely discussed, the time-varying impacts of uncertainties on tourism have been ignored. This paper investigates the time-varying relationship between two global and domestic uncertain shocks (namely, economic policy uncertainty (EPU), geopolitical risks (GPR)) with Chinese inbound tourism using a time-varying parameter vector autoregression (TVP-VAR) model. The empirical results show that uncertain shocks on tourist arrivals have significantly time-varying features, and the direction of the effect changes. The impact gradually weakens with the increase in the lag period. However, the impacts are heterogeneous depending on the uncertain shocks. Additionally, the effects of major event shocks on tourism differ. The uncertainty of the 9/11 terrorist attack had the shortest impact on tourism, while the impact on tourism was greater for geopolitical risks than for economic policy uncertainty during the global financial crisis. These findings provide new insights for policy holders and relevant investors into the mentioned relationships.

Automated summary

This study explores the time-varying relationship between global and domestic uncertain shocks and Chinese inbound tourism using a TVP-VAR model. The results show that uncertain shocks have time-varying impacts on tourist arrivals, and the effects differ depending on the type of shock.