Does geopolitical risk mitigate inbound tourism? Evidence from panel quantile regression

• Published date: 01 December 2022
• Author: Qasim Raza Syed,Elie Bouri,Raja Fawad Zafar,Oluwasegun B. Adekoya
• Date: 01 December 2022
• DOI: http://doi.org/10.1002/pa.2784

RESEARCH ARTICLE

Does geopolitical risk mitigate inbound tourism?

Evidence from panel quantile regression

Qasim Raza Syed

1

| Elie Bouri

2

| Raja Fawad Zafar

3

| Oluwasegun B. Adekoya

4

1

National Tariff Commission, Ministry of

Commerce, Islamabad, Pakistan

2

School of Business, Lebanese American

University, Beirut, Lebanon

3

Sukkur IBA University, Sukkur, Pakistan

4

Federal University of Agriculture,

Abeokuta, Nigeria

Correspondence

Qasim Raza Syed, National Tariff Commission,

Ministry of Commerce, Pakistan.

Email: qasimrazasyed.economics@gmail.com

The authors of this study examine the impact of geopolitical risk on inbound tourism

in the BRICS (Brazil, Russia, India, China, and South Africa) countries. To this end,

they employ second-generation panel data methods, augmented mean group estima-

tors, and panel quantile regressions. The results of the augmented mean group esti-

mators show that geopolitical risk negatively impacts inbound tourism. However, the

results of the panel quantile regressions reveal that the impact is heterogeneous

across the distribution. At low quantiles, the impact of geopolitical risk on inbound

tourism is marginal, whereas the impact is strong at high quantiles. The study has

some policy implications for tourism development.

KEYWORDS

augmented mean group estimator, BRICS, geopolitical risk, inbound tourism, panel quantile

regression

1|INTRODUCTION

The tourism industry is one of the prime industries in every economy

given its impact on employment, investment, and foreign exchange

rates (Archer & Fletcher, 1996; Fayissa et al., 2008; Tohmo, 2018). It

can contribute to economic growth and development (Brida &

Risso, 2009; Tang & Abosedra, 2014). In addition, tourism affects

socioeconomic indicators such as income inequality, women's empow-

erment, and poverty (Alam & Paramati, 2016; Mahadevan &

Suardi, 2019; Nassani et al., 2019). Hence, tourism can have profound

socioeconomic impacts on both developed and developing countries,

suggesting that countries should promote tourism, and pay special

attention to the factors that shape it.

Over the last few decades, geopolitical risk (GPR) has escalated in

emerging economies. Tensions within, and across, countries have

intensified. For example, the number of terrorist attacks (such as the

Bombay attack and Kashgar attacks) has increased across the world.

All these adverse events have profound socioeconomic impacts and

can shape tourism activities. High GPR may compel tourists to post-

pone or cancel trips due to security concerns, and discourage invest-

ment in the tourism industry, which can, in turn, reduce inbound

tourism. Moreover, high GPR may divert the attention of policy

makers from tourism development to foreign policy. Therefore, it is

imperative to explore the relationship between GPR and inbound

tourism.

Given this background, the aim of this study is to examine the

impact of GPR on inbound tourism in the BRICS (Brazil, Russia, India,

China,and South Africa) countries. TheBRICS countries area set or bloc

of emerging countries, which have received a great deal of attention

from policy makers and researchers, as they occupy almost 25% of the

earth's land mass and contain about 40% of the world's population.

Notably, almost 50% of the world's economic growth is generated by

the BRICS countries. Additionally,BRICS account for morethan 14% of

global trade volume and 50% of global foreign investment (Syed, &

Bouri, 2021). The tourism industry contributes significantly to the eco-

nomic activity of the BRICS countries. Table 1gives tourism statistics

for the BRICS countries. The BRICS countries are significant political

powers in the new era. They have geopolitical tensions with both each

other and the rest of the world. The social, political, and economic

importance of the BRICScountries motivates the presentstudy to inves-

tigatethe impact of GPR on inboundtourism in the BRICScountries.

Caldara and Iacoviello (2018) propose the geopolitical risk index

(GPRI), which incorporates the risk associated with political instability,

war, and terrorism. The existing literature is scarce regarding the

impact of GPRI on inbound tourism in BRICS. Demir et al. (2019) con-

clude that GPR is one of the reasons for delays and postponements of

Received: 10 February 2021 Revised: 16 September 2021 Accepted: 14 October 2021

DOI: 10.1002/pa.2784

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https://doi.org/10.1002/pa.2784