International country risk and tourism demand: A multidimensional analysis using a mixed-frequency global vector autoregressive model in the Asia-Pacific Region

Abstract

Although tourism's vulnerability to geopolitical and macroeconomic shocks is well-documented, existing research remains fragmented and overlooks the systemic interdependencies of country risks. This study integrates monthly country risk indices with quarterly tourism demand data to analyze risk spillovers across 12 Asia Pacific tourism markets. Using a novel mixed-frequency global vector autoregressive (MF-GVAR) methodology that incorporates trade, culture, and geography connections, this study reveals key insights. Trade dominates risk spillovers via exchange rates, while cultural factors influence tourism demand, thus necessitating multidimensional risk management. Risk transmission varies: financial risks are spread through trade, political risks through geography, and cultural links act indirectly. The COVID-19 pandemic directly hit tourism and GDP, bypassing price buffers. Australia and Hong Kong act as regional spillover hubs. Australia's influence stems from cultural and geographical ties, Hong Kong's from trade. Thus, Australia can promote cultural exchange to boost regional tourism resilience, Hong Kong can lead trade cooperation.