Does climate policy uncertainty affect tourism demand? Evidence from time-varying causality tests

Abstract

This study examines whether climate policy uncertainty affects the propensity of people to travel. To do so, we employ the Climate Policy Uncertainty (CPU) index and US air-travel data to eight regional overseas destinations for the period 2000–2019. Using time-varying causality tests to deal with the structural breaks that exist in the relationship between CPU and US air travel, we find that CPU is a major determinant of air-travel demand to all destinations examined. The results are robust when we control for macroeconomic factors, uncertainty and geopolitical risks. The findings have important implications for destination countries and tourism professionals.