ABSTRACT
In the last few decades, tourism activities have been one of the major sources of revenue inflows and play a crucial role in the economic betterment of an economy. Besides being one of the major sources of foreign earnings, mobilisation, and foreign exchange earnings, the tourism industry also stimulates tax revenue and generates huge employment opportunities. This necessitates any country to put adequate efforts to maintain and promote its tourism industry.
During the last few years, the fast-changing dynamics in the economic and political environment of any country have made the linked uncertainties a critical issue for any nation. The susceptibility to these uncertainties may also have a debilitating effect on the tourist inflow and thus hamper the economic prosperity of the host nation. The present piece of research endeavours to explore and analyse the effects of economic policy uncertainty and geo-political risk on the developed economy of the United States and the emerging economies of Mexico and India. The Economic Policy Uncertainty Index corresponds to the uncertainties linked with macroeconomic issues like trade, fiscal, national security, etc. The components of the Geo-Political Risk Index comprise issues having political, diplomatic, security, and other national interests which can create national and international tension if not addressed properly. The present chapter not only endeavours to compare the effects of these two uncertainties on the tourism inflow but also attempts to make a comparative analysis between a developed and developing country.
In this direction, the present chapter employs the novel approach of quantile regression to investigate the linkage between the interested ones for the monthly data spanning from January 2011 to December 2019. The rationale behind employing the quantile regression is the inability of the conventional ordinary least squares method to present a robust analysis for removing the effect of structural breaks from the dataset, non-normality set-up, and heterogeneous distribution. The analysis of the variables revealed the presence of asymmetric linkage between the dependent and the independent variables. Furthermore, the effect of the Geo-Political Risk Index on tourist inflow was observed to be more profound than that of economic policy uncertainty in India and the United States across the majority of the quantiles inverse linkage between the geo-political risk and tourism inflow was observed in the case of the United States and India. However, the same was not observed for Mexico. The level of significance of the effect of the independent variables also varied across the quantiles.
The findings from the analysis may hold significant policy implications for effective decision-making in this direction. More tourists can be attracted towards a particular nation through the appeal of better economic policy uncertainty and Geo-political Risk of the country. Empirical linkage also suggests the same that a country with lower economic uncertainty and geo-political risk attracts tourist inflows.
