Risk, uncertainty and the tourism sector of North Africa

Abstract

This paper investigates, for the first time, the uncertainty on the tourism of North Africa and uncertainty on the second‐degree effects of the North African tourism sector. The study uses data from 1995 to 2019 and a structural vector autoregression to perform the investigation. The research finds that uncertainties, measured by the uncertainty of Europe, the uncertainty of the Middle East and Central Asia, and the volatility of GDP growth of the Euro area, have significant negative effects on investment and job creation in, as well as the contribution to the GDP of, the North African tourism sector. The paper invents a new proxy of risk, measured by the volatility of crude oil production in North Africa, and finds that this new risk measure has a significant negative impact on the North African tourism sector. The results show that geopolitical risk and the uncertainty of Africa do not significantly affect the North African tourism sector. The paper suggests that policymakers in North Africa subsidize tourism‐related activities and explore new markets to attract tourists during periods of high risk and uncertainty.

Psychological factors of Canadian and Mexican tourists and the US tourism sector

“…The GPR index is formed from the number of articles linked to geopolitical risk in 5 British, 1 Canadian, and 6 US newspapers. Istiak (2021) finds that this international or global form of risk may not be a good proxy for a regional or country level domestic risk. When tourists make travel decisions, they are concerned about local risks, not about international risks related to the areas thousands of miles apart.…”

“…Second, according to the argument of Istiak (2021), a US domestic proxy of insecurity (rather than traditionally used geopolitical risk or political risk) has been used to represent the insecurity of the US tourism sector. This paper uses the US security uncertainty index to represent the insecurity feelings of foreign tourists.…”