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Examining the link between terrorism and tourism demand: The case of Egypt

The current study explores the link between tourist demand and terrorism in Egypt using monthly data for the period from 1995 to 2018. We aim to investigate whether this relationship is unidirectional of bidirectional and whether it exhibits persistence in the long run. Terrorism is proxied by performing principal component analysis on the number of terrorist incidents and the number of resulting deaths and injuries. We test for cointegration employing a Vector Autoregressive Model with Error Correction. We find evidence of a long-term cointegrating relationship between tourism and terrorism. Our empirical results show that the direction of this causal relationship is from terrorism to tourism only, meaning that policymakers should not expect a rise in terrorist activity during periods of increased tourist arrivals. Our findings indicate that authorities should enforce strict measures against terrorism in order to promote safety and security within the tourism context.