Geopolitical and economic risks and tourism in Tunisia: A wavelet-based analysis

Abstract

This paper examines the intricate relationships between geopolitical risk, political and economic uncertainties, currency rate fluctuations, and tourist arrivals in Tunisia. Using monthly data from 1993 to 2023, we employ an innovative wavelet local multiple regression approach to delve into these risk factors’ isolated and combined time-frequency varying effects. Our findings unveil diverse relationships between risk factors and tourism arrivals across various time scales and frequencies. Notably, we find that the isolated impact of risk factors is consistently negative and significant in the short and mid-term, particularly in response to political violence and escalating geopolitical risk. However, in the long term, the combined impact of risk factors is notably weak and positive, with political risk exerting the most influence, followed by geopolitical risk. Our findings are robust and consistently supported by Granger spectral causality tests and yield valuable insights for policymakers and tourism stakeholders in Tunisia.