Impacts of terrorism, governance structure, military expenditures and infrastructures upon tourism: empirical evidence from an emerging economy

Many countries are actively pursuing tourism-oriented policies to boost their economic growth. Tourism as an essential economic activity in most countries not only generates revenue but also develops infrastructures and creates jobs and investment opportunities. Several factors can affect the tourism activities of a country. This study investigates the impacts of terrorism, governance structure, military expenditures, and physical and ICT infrastructures upon tourism in an emerging economy, Pakistan. The ARDL bounds testing approach to cointegration is applied with data for the period of 2002Q1–2016Q4. The empirical results show that terrorism, military expenditures, and physical and ICT infrastructures have adverse impacts on tourism both in the short run and in the long run. The governance structure has a positive impact on tourism. Nevertheless this impact, as well as the impact of terrorism, is not significant. The findings from Johansen cointegration and dynamic ordinary least square approaches corroborate the results. This study proposes that governance structure, and physical and ICT infrastructures be improved to promote tourism activities. It is also suggested that more effective measures rather than mere military actions be taken to curtail terrorism and develop tourism. Detailed policy implications are also discussed.