The impact of the economic policy uncertainty and geopolitical risks on tourism demand of Mexico

Abstract

The aim of this study is to determine the effects of geopolitical risk, representing macropolitical factors that may affect number of inbound tourists, and economic policy uncertainty, representing macro-level events, and exchange rates, on inbound tourists to Mexico over the period January 1996 - December 2018 by using Fourier ARDL and Fourier Toda Yamamoto causality tests. The ARDL analysis showed that inbound tourists to Mexico decrease in the long-run as economic policy uncertainty increases and increase in the long-run as geopolitical risk and real exchange rates increase. Causality tests revealed unidirectional causality running from economic policy uncertainty to inbound tourists.

Keywords

• mexico
• international tourist arrivals
• geopolitical risk
• economic policy uncertainty