Modelling the Asymmetric Impact of Terrorism and Military Expenditure on Tourism Development: A Case of the Tourist Destination Country

Abstract

This study evaluates the asymmetric effects of terrorist attacks and military spending on India's tourism sector by considering gross capital formation and foreign direct investment inflows in the tourism function as controlled variables. Considering the period 1980 to 2017, we employed a non-linear autoregressive distributed lag (NARDL) model and frequency domain causality. This study found that a 1% positive (negative) shock in the partial sum of the terrorist incidents would decrease (increase) the tourist arrivals by 0.17% (0.19%), respectively. However, a positive shock in the partial sum of military spending would enhance tourist arrivals, while a negative shock would lower them both in the short and long run. In addition, gross capital formation and foreign direct investment inflows favourably influence India's tourism development in the long run. The findings from frequency domain casualty also resonate with this study's short-run and long-run findings.