Exploring the influence of economic policy uncertainty on the relationship between tourism and economic growth with an MF-VAR model

Abstract

Using a mixed-frequency vector autoregressive (MF-VAR) model, this article attempts to determine whether or not the relationship between tourism and economic growth changes in the presence or absence of economic policy uncertainty (EPU) shock. Moreover, we further our analysis by focusing on whether or not there is a significant difference in the distinct impact intensity of Hong Kong, Chinese, and global EPU. The study period spans April 1998 to March 2018. The results indicate the following. First, the existence of Hong Kong, Chinese, and global EPU does not affect the direction of the impulse response; rather, its primary influence is on the size of the impact. Second, the different ranges of EPU have different impact intensities. Third, compared to the MF-VAR model, the quarterly frequency vector autoregressive model does not fully capture the impact of EPU, especially the negative impact of global EPU on tourism. Therefore, policymakers and tourism stakeholders should develop targeted marketing plans to maintain expected tourism demand if economic uncertainty increases.