Pandemic and Economy: An Econometric Analysis Investigating the Impact of COVID-19 on the Global Tourism Market

Abstract

With the outbreak of the COVID-19 pandemic, the global tourism market has become one of the most affected sectors of the economy. In this research, the literature on the economic effects created by COVID-19 on a global level is first studied and the measures and restrictions that governments are obliged to take in order to suppress and prevent the spread of the coronavirus are analyzed. Next, there is an attempt to empirically estimate a system of equations regarding the two channels of influence of COVID-19 on tourism, making use of cross-sectional data, and specifically for a sample of 38 countries that launched vaccination up until the end of 2020. The explained results confirm that tourism is directly affected by the spread of COVID-19, due to the effort of travelers to avoid illness, but also due to the measures taken by governments to limit it. Tourism is also indirectly affected, due to the negative impact on income. Using 3SLS, an equation was developed to calculate the direct and indirect impact of COVID-19 on tourism. Notably, the dependent variable (tourism expenditure) exhibited a positive correlation with the independent variable (GDP) and a negative correlation with the total COVID-19 cases. Consequently, it was determined that a unit increase in the COVID-19 variable led to a reduction in international tourism expenditure by USD 859,237. Finally, there is a concern, and further investigation is needed, regarding the effect of vaccination against COVID-19 on tourism, which, while it is expected to be negative, is not confirmed by the results.