Empirical Evidence on Tourism, Geopolitical Risk and Economic Policy Uncertainty Relationships in Malaysia
Abstract
Malaysia, celebrated for its rich cultural diversity, vibrant cities, and pristine natural landscapes, stands prominently on the global tourism map. However, the tourism industry is susceptible to the impact of geopolitical risk and economic policy uncertainty. These external factors, shaped by global events and policy changes, can significantly influence the tourism landscape in Malaysia. Given this significance, the study aims to empirically investigate the cointegrating relationship between international inbound tourism levels (tourist arrivals), geopolitical risk (GPR index), and economic policy uncertainty (EU index) in Malaysia. The analysis uses quarterly observations from the first quarter of 2000 to the fourth quarter of 2022. The study employs the Granger Causality test, supported by structural VAR impulse functions and variance decomposition analysis to illustrate how economic policy uncertainty responds to shocks in tourist arrivals. The significant causal relationship observed moves from tourist arrivals to economic policy uncertainty. In other words, the study implies that variations in tourist arrivals have a lasting impact on economic policy uncertainty but not necessarily on geopolitical risk. This study provides valuable implications for policy planning and decision-making. Policymakers should consider the implications of shifts in tourism patterns for economic policy uncertainty. The absence of a long-term relationship between tourist arrivals and geopolitical risk may suggest conducting separate risk assessments to manage geopolitical risks that may affect the tourism industry in Malaysia.
Downloads
References
Akadiri, S. S., Alola, A. A., & Uzuner, G. (2020). Economic policy uncertainty and tourism: evidence from the heterogeneous panel. Current Issues in Tourism, 23(20), 2507-2514.
Al?Thaqeb, S. A., Algharabali, B. G., & Alabdulghafour, K. T. (2022). The pandemic and economic policy uncertainty. International Journal of Finance & Economics, 27(3), 2784-2794.
Álvares, G., Hoti, S., & McAleer, M. (2007). Modeling international tourist arrivals to the five major Spanish destinations. Modeling and Simulation Society of Australia and New Zealand.
Balli, F., Uddin, G. S., & Shahzad, S. J. H. (2019). Geopolitical risk and tourism demand in emerging economies. Tourism Economics, 25(6), 997-1005.
Brooks, C. (2019). Introductory econometrics for finance. Cambridge University Press.
Caldara, Dario and Matteo Iacoviello (2022). Measuring Geopolitical Risk. International Finance Discussion Papers 1222r1. Washington: Board of Governors of the Federal Reserve System, https://doi.org/10.17016/IFDP.2022.1222r1.
Demir, E., Gozgor, G., & Paramati, S. R. (2019). Do geopolitical risks matter for inbound tourism? Eurasian Business Review, 9, 183-191.
Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366a), 427-431.
Do?an, B., Ghosh, S., Tiwari, A. K., & Abakah, E. J. A. (2023). The effect of global volatility, uncertainty and geopolitical risk factors on international tourist arrivals in Asia. International Journal of Tourism Research, 25(1), 1-62.
Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: journal of the Econometric Society, 251-276.
Fuad, S. N. A., & Puasa, A. F. (2011). National key economic area multiplier impact on Malaysian economy: An input-output analysis. International Journal of Management Studies, 18, 34-58.
Gavurova, B., Skare, M., Belas, J., Rigelsky, M., & Ivankova, V. (2023). The relationship between destination image and destination safety during technological and social changes COVID-19 pandemic. Technological Forecasting and Social Change, 191, 122488.
Gavurova, B., Suhanyi, L., & Rigelský, M. (2020). Tourist spending and productivity of the economy in OECD countries–research on perspectives of sustainable tourism. Entrepreneurship and Sustainability Issues. https://doi.org/10.9770/jesi.2020.8.1(66)
Ghosh, S. (2021). Geopolitical risk, economic growth, economic uncertainty and international inbound tourism: an Indian illustration. Review of Economics and Political Science, 7(1), 2-21.
Granger, C. W., & Newbold, P. (1974). Spurious regressions in econometrics. Journal of Econometrics, 2(2), 111-120.
Hailemariam, A., & Ivanovski, K. (2021). The impact of geopolitical risk on tourism. Current Issues in Tourism, 24(22), 3134-3140.
Hasan, M., Naeem, M. A., Arif, M., Shahzad, S. J. H., & Nor, S. M. (2020). Geopolitical risk and tourism stocks of emerging economies. Sustainability, 12(21), 9261.
Hu, Y., & Xu, S. (2021). Memorability of a previous travel experience and revisit intention: The three-way interaction of nostalgia perceived disappointment risk and extent of change. Journal of Destination Marketing & Management, 20, 100604.
Malaysia Tourism Promotion Board (2022). Malaysia Tourism Key Performance Indicator 2022, https://mytourismdata.tourism.gov.my/wp-content/uploads/2023/11/KPI2022-Final-lores.pdf
Mokdadi, S., & Saadaoui, Z. (2023). Geopolitical uncertainty and the cost of debt financing: the moderating role of information asymmetry. The Journal of Risk Finance, 24(5), 684-720.
Muzaini, H. (2018). Informal heritage-making at the Sarawak cultural village, East Malaysia. In Theming Asia (pp. 102-122). Routledge.
Ongan, S., & Gozgor, G. (2018). Tourism demand analysis: The impact of the economic policy uncertainty on the arrival of Japanese tourists to the USA. International Journal of Tourism Research, 20(3), 308-316.
Payne, J. E., Nazlioglu, S., & Mervar, A. (2023). Economic policy uncertainty and international tourist arrivals: A disaggregated analysis of the Croatian Adriatic coast. Tourism Economics, 29(4), 986-1004.
Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346.
Pole, L., & Grizane, T. (2021). Tourism tax model for the development of regions. Research for Rural Development, 36.
Raheem, I. D., & le Roux, S. (2023). Geopolitical risks and tourism stocks: New evidence from the causality-in-quantile approach. The Quarterly Review of Economics and Finance, 88, 1-7.
Saint Akadiri, S., Eluwole, K. K., Akadiri, A. C., & Avci, T. (2020). Does causality between geopolitical risk, tourism and economic growth matter? Evidence from Turkey. Journal of Hospitality and Tourism Management, 43, 273-277.
Samsudin, N. A., & Fuza, Z. I. M. (2021, November). Attribution of Family Business-Based in Cultural Heritage Management in Malaysia. In International Conference on Business and Technology (pp. 683-697). Cham: Springer International Publishing.
Soylu, Ö. B. (2020). Panel Granger causality analysis of relationships between tourism and economic growth in the top eight tourist destinations. Ekonomski Pregled, 71(4), 407-430.
Syed, Q. R., Bouri, E., Zafar, R. F., & Adekoya, O. B. (2022). Does geopolitical risk mitigate inbound tourism? Evidence from panel quantile regression. Journal of Public Affairs, 22, e2784.
Tang, C. F., & Tan, E. C. (2015). Does tourism effectively stimulate Malaysia's economic growth? Tourism Management, 46, 158-163.
Tiwari, A. K., Das, D., & Dutta, A. (2019). Geopolitical risk, economic policy uncertainty and tourist arrivals: Evidence from a developing country. Tourism Management, 75, 323-327.
Tovmasyan, G. (2021). Capital investments, tourist tax and tourism development: the case study of Armenia. Economics and Sociology, 14(1), 199-213.
Tsung-Li, W., Hung-Pin, L., & Yu-Chi, S. (2022). The Dynamic Analysis Among Energy Consumption, Tourist Expansion and Economic Growth on Carbon Dioxide Emissions. Economic Computation & Economic Cybernetics Studies & Research, 56(4).
Usmani, G., Akram, V., & Praveen, B. (2021). Tourist arrivals, international tourist expenditure, and economic growth in BRIC countries. Journal of Public Affairs, 21(2), e2202.
Uzuner, G., Akadiri, S. S., & Alola, A. A. (2020). Tourist arrivals in four major economies: another side of economic policy uncertainty and fear. Environmental Science and Pollution Research, 27, 29659-29665.
Walpole, M. J., Goodwin, H. J., & Ward, K. G. (2001). Pricing policy for tourism in protected areas: lessons from Komodo National Park, Indonesia. Conservation Biology, 15(1), 218-227.
World Travel and Tourism Council. (7 June 2021). The new WTTC campaign shows the importance of international travel to people and businesses around the world. London. https://wttc.org/news-article/new-wttc-campaign-shows-the-importance-of-international-travel-to-people-and-businesses-around-the-world
Wu, W., Zhang, L., & Qiu, F. (2017). Determinants of tourism ticket pricing for ancient villages and towns: Case studies from Jiangsu, Zhejiang, Shanghai and Anhui provinces. Tourism management, 58, 270-275.
Wujie, X. (2023). The impact of geopolitical risks and international relations on inbound tourism—evidence from China and key source countries. Cogent Social Sciences, 9(2), 2285244.
Zhang, H., Jiang, Z., Gao, W., & Yang, C. (2022). Time-varying impact of economic policy uncertainty and geopolitical risk on tourist arrivals: Evidence from a developing country. Tourism Management Perspectives, 41, 100928.
Zhang, Y., & Zhang, J. (2023). Tourist Attractions and Economic Growth in China: A Difference-in-Differences Analysis. Sustainability, 15(7), 5649.
Zou, Y., & Yu, Q. (2022). Sense of safety toward tourism destinations: A social constructivist perspective. Journal of Destination Marketing & Management, 24, 100708.
Copyright (c) 2024 Siti Nurhidayah Mohd Roslen, Chua Mei Shan, Azlul Kalilah Zaghlol, Shafinaz binti Ahmad Nazar, Pang Mary
This work is licensed under a Creative Commons Attribution 4.0 International License.
Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of revised paper in the light of suggestions of the reviewers, the editorial team edits and formats manuscripts to bring uniformity and standardization in published material.
This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.
