Dynamic Common Correlated Effects of Geopolitical Risk on International Tourism Arrivals

Abstract

Research background Geopolitical risk is currently recognized as a worldwide concern that significantly affects various economic sectors. As a consequence, rising geopolitical risks can cause a decline in the number of tourist arrivals. Purpose The aim of this paper is to examine the applicability of a commonly used dynamic model, the autoregressive distributed lag model (ARDL), in a panel data context and the effect of geopolitical risk on explaining tourist demand in chosen countries across long and short time periods. Research methodology On 18 developing economies, the Cross-sectionally Augmented Distributed Lag (CS-ARDL) technique is used. Results The results of the test show interesting insights. Although the consequences of geopolitical threats in the short term are significant and have a negative impact on tourist arrivals, in the long term, results show there is no effect. Specifically, a rise in geopolitical risk decreases foreign visitor visits in the short term but has no lasting impact. Novelty Using an econometric model, this study contributes to the limited research on the link between geopolitical risk and tourist arrivals.