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Do geopolitical risks matter for inbound tourism?

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Abstract

This paper aims to analyze the impact of geopolitical risks measured by a new index of geopolitical risk (GPR) on inbound tourism. For this purpose, we use the fixed-effects and the least squares dummy variable corrected estimations for panel data of 18 countries for the period from 1995 to 2016. We find that geopolitical risks negatively affect inbound tourism. We also implement various robustness checks, such as introducing control variables, considering the lagged effect of the GPR, and utilizing different econometric techniques.

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Notes

  1. See e.g., Song and Li (2008) and Song et al. (2012) for a review of the literature for using those approaches.

  2. Please see Appendix 1 for the list of countries.

  3. Therefore, the GPR index considers both conflicts and political instability as well as the measures of terrorism.

  4. Visit https://www2.bc.edu/matteo-iacoviello/gpr.htm for the details of the GPR indexes.

  5. The bias correction is initialized by the Blundell–Bond estimator.

  6. Specifically, our data have 18 countries and 22 years, that is T > N. For details, see Bruno (2005).

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Authors and Affiliations

  1. Faculty of Tourism, Istanbul Medeniyet University, Istanbul, Turkey

    Ender Demir

  2. Faculty of Political Sciences, Istanbul Medeniyet University, Istanbul, Turkey

    Giray Gozgor

  3. School of Business, University of Dundee, Dundee, UK

    Sudharshan Reddy Paramati

Authors
  1. Ender Demir
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  2. Giray Gozgor
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  3. Sudharshan Reddy Paramati
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Correspondence to Ender Demir.

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Appendices

Appendix 1

1.1 List of countries and details of six groups in Geopolitical Risk (GPR) Index

GPR Index is available for Argentina, Brazil, China, Colombia, India, Indonesia, Israel, the Korea Republic, Malaysia, Mexico, the Philippines, Russia, Saudi Arabia, South Africa, Thailand, Turkey, Ukraine, and Venezuela.

There are six sub-groups in the GPR index. Group 1 includes words associated with explicit mentions of geopolitical risk, as well as mentions of military-related tensions involving large regions of the world and the US involvement. Group 2 includes words directly related to nuclear tensions. Groups 3 and 4 include mentions related to war threats and terrorist threats, respectively. Finally, Groups 5 and 6 aim at capturing press coverage of actual adverse geopolitical events (as opposed to just risks) which can be reasonably expected to lead to increases in geopolitical uncertainty, such as terrorist acts or the beginning of a war.

Appendix 2

See Fig. 1.

Fig. 1
figure 1

Geopolitical Risk (GPR) Index for top 4 tourism destinations in the dataset

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Appendix 3

See Table 3.

Table 3 Correlation matrix
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Demir, E., Gozgor, G. & Paramati, S.R. Do geopolitical risks matter for inbound tourism?. Eurasian Bus Rev 9, 183–191 (2019). https://doi.org/10.1007/s40821-019-00118-9

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