Trends in tourism under economic uncertainty

Khalid Khan, Chi-Wei Su, Yi-Dong Xiao, Haotian Zhu and Xiaoyan Zhang
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Khalid Khan: 12689Qilu University of Technology, China
Chi-Wei Su: 12593Qingdao University, China
Yi-Dong Xiao: 1438University of California, USA
Haotian Zhu: 6572University of Pennsylvania, USA
Xiaoyan Zhang: Shanxi University of Finance and Economics, China

Tourism Economics, 2021, vol. 27, issue 4, 841-858

Abstract: We use the gravity model to examine the causal link between economic policy uncertainty (EPU) and inbound tourism (ITM) in the United Kingdom. The results for the full sample demonstrate that EPU Granger causes ITM. This finding shows that association is misappropriated due to structural changes. We apply the time-varying rolling window technique to revisit the dynamic association between EPU and ITM. The findings for the subsamples indicate that EPU has a negative effect on ITM. In contrast, ITM has a positive effect on EPU in the subsamples. These results support the gravity model, which states that as EPU increases, the level of ITM decreases. The results have noteworthy implications for policymakers in the form of consistency in policies and short-term shock forecasting that is capable of greater shock-absorbing capacity to lessen the revocation of tourist programs. A stable exchange rate regime in the destination country will make tourism cheaper and more attractive to tourists. Decision-makers should consider time-varying attributes to establish tourism activities for effective and accurate predictions.

Keywords: economic policy uncertainty; gravity model; inbound tourism; time-varying association (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:27:y:2021:i:4:p:841-858

DOI: 10.1177/1354816620909608

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