Testing the efficacy of the economic policy uncertainty index on tourism demand in USMCA: Theory and evidence

Abstract

The global economic outlook is more uncertain than ever before and sensitive to uncertainties related to a variety of economic policies decisions of all stakeholders and governments. These perceived uncertainties may be the culprit in shrinking the size of overall economic activity. Under increasing uncertainties, travel and vacation plans of consumers can be canceled or postponed. Therefore, policy-related economic uncertainties are expected to affect tourism demand beyond well-established economic and noneconomic factors. In this study, we explore the efficacy and the impact of the economic policy uncertainty (EPU) index in predicting the tourism demand on international tourist arrivals (a measure of tourism demand) to the United States from Mexico and Canada over the period of January 1996–September 2017. The findings of the study reveal that EPU is a significant predictor as increases in the EPU index lead to decreases in tourism demand to the United States. Canadian tourists seem to be more sensitive to EPUs. Increases in the EPU index cause them to reduce Canadians’ vacations to the United States proportionally more than the Mexicans. To enhance the explanatory power of current models, the uncertainty can be a theoretically significant construct thus needs to be included when calibrating demand models.

An investigation into the anthropogenic nexus among consumption of energy, tourism, and economic growth: do economic policy uncertainties matter?

“…Likewise, the EPU in the USA is negatively associated with domestic tourism spending in the USA (Gozgor and Ongan 2017). According to Işık et al (2019c), an increase in the EPU in Canada and Mexico reduces the number of tourists' arrivals from these countries to the USA. Similarly, Akron et al 2020) find that investment policies in 305 hospitality companies are negatively affected by EPU in the USA.…”

Environmental awareness and guests’ intention to visit green hotels: The mediation role of consumption values

“…In the recent time, the issue of sustainable development is gaining more attention at all levels and in all economic sector, most especially the tourism and hotel industry [3,[6][7][8]. Most of the countries where tourism contributes a significant percentage to their GDP, efforts in ensuring the sustainability of their environment to keep track with the market demand is important [3,9,10].…”

Tourism Demand: Emerging Theoretical and Empirical Issues

“…Işik, Sirakaya-Türk and Ongan examine the efficacy of economic policy uncertainty on tourism demand in North America. Işık et al, 2019 find that the economic policy uncertainty is perceived differently by tourists from North American countries, with this impact being more pronounced among Canadian tourists compared to Mexican tourists. Nguyen, Schinckus and Su examine the effect of a rise in global economic policy uncertainty on international tourist arrivals and expenditures.…”