The role of institutional quality on tourist arrivals in leading emerging economies

This study explores the relationship between tourist arrivals and institutional quality in leading emerging economies (Brazil, China, India, Indonesia, Mexico, Russia, and Turkey) during 1996 to 2022. By utilizing principal component analysis for dimensions of governance performance, such as voice and accountability, political stability and absence of violence/terrorism, government effectiveness, regulatory quality, rule of law, and control of corruption, this study develops a comprehensive index that enables a nuanced understanding of the collective effect of these dimensions on tourism. The results of the panel data estimations indicate that institutional quality positively affects tourist arrivals in all countries, with strong effects in Mexico, Russia, and Turkey. Additionally, the study accounts for economic growth, the real effective exchange rate, and gross fixed capital formation, all of which show that overall, tourist arrivals increase in response to economic growth, decline in response to the exchange rate, and increase in response to gross fixed capital formation, with country-specific effects. Granger causality evidence supports these findings, implying the need for a comprehensive policy review to encourage the tourism industry in these countries.