The effect of climate policy uncertainty and geopolitical risks on tourism development: a KRLS and frequency domain causality analysis

The tourism sector, indeed, is very delicate, and rising uncertainty can have a variety of effects. Geopolitical risks and climate policy uncertainty are resulting in unanticipated events that affect economic policy uncertainty. This study aims to investigate how climate policy uncertainty and geopolitical risks may affect tourism development in China. By using novel econometrics approaches, including the Dynamic Autoregressive Distributive Lags (ARDL) model, Kernel Regularized Least Squares (KRLS) method, and Frequency Domain Causality (FDC) test, the study’s findings demonstrate that geopolitical risk and climate policy uncertainty have negative long-term effects on tourism. However, economic sustainability, market volatility, financialization, and digitization have favorable effects on Chinese tourism. Moreover, the causality test results reveal that climate policy uncertainty causes tourism in the medium and short run. In contrast, geopolitical risks cause tourism in the long, medium, and short run. These results highlight that while performing risk analyses for tourism investment and policymaking, the Chinese government and practitioners working in the tourism industry should monitor both geopolitical risks and policy uncertainties related to the climate.