EFFECT OF POLITICAL RISK SHOCKS ON TOURISM REVENUE IN SOUTH AFRICA: TIME SERIES ANALYSIS

Year 2016, Volume: 8 Issue: 2, 169 - 186, 01.12.2016

Paul-Francois Muzindutsi Jean Claude Manaliyo

Abstract

Although political risk has an impact on all types of businesses, political risk
affects tourism business performance in terms of tourist arrivals and tourism
revenue because tourists are very sensitive to political risk in host countries. This
study analysed the effect of political risk on revenue from the tourism industry in
South Africa. The sample period of 108 months from January 2007 to December
2015 was used based on the availability of data. The political risk were measured
by the country’s political risk index; whilst tourism revenue was measured by the
total monthly income from the entire tourism industry in South Africa. The
autoregressive distributed lag (ARDL) model was used to test the short-run and
long-run relationships between political risk and tourism revenue. Results showed
that political risks have a long-run effect on real revenue from the tourism
industry but there was no empirical evidence supporting the short-run
relationship. Findings of this study suggest that it takes time for the political
shocks to be manifested in tourism revenue. This study showed that the South
African tourism revenue continued to grow, even during the period of increasing
political risk and hence a further analysis of how different dimensions of political
risk affect different categories of tourism revenue, was recommended.

Keywords

ARDL, Cointegration, Political Risk, Time Series, Tourism, South Africa

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