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Unveiling the mystery of the responsiveness of inbound tourism to economic policy uncertainty: New evidence from Australia

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  • Yuting Gong
  • Chia-Hsun Chang
  • Paul Tae-Woo Lee
  • Jingbo Yin
  • Wenming Shi

Abstract

Using a time-varying parameter vector autoregressive (TVP-VAR) model, this study analyzes how inbound tourist arrivals (TOUR) respond to EPU in Australia. Empirical results show that EPU can Granger cause TOUR in most cases before COVID-19, whereas little evidence supports this finding after the pandemic. At the national level, it is found that EPU was the net risk transmitter before COVID-19 but became the net risk receiver after COVID-19, while TOUR was the net risk receiver over March 2007-March 2020 but became the net risk transmitter in the remaining months. The impulse response functions reflect that a 2.81% decline in the total TOUR was observed due to a 1% increase in EPU, which gradually decayed within 9Â months for the sub-sample before COVID-19. Similar findings hold at the state/territory level. These findings provide profound evidence for the national and state/territory governments to allocate tourism resources and formulate supportive tourism policies.

Suggested Citation

  • Yuting Gong & Chia-Hsun Chang & Paul Tae-Woo Lee & Jingbo Yin & Wenming Shi, 2024. "Unveiling the mystery of the responsiveness of inbound tourism to economic policy uncertainty: New evidence from Australia," Tourism Economics, , vol. 30(8), pages 2159-2180, December.
    • Handle: RePEc:sae:toueco:v:30:y:2024:i:8:p:2159-2180
    DOI: 10.1177/13548166241256993
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