Geopolitical Uncertainty and International Tourism Demand: Evidence from a Quasi-Natural Experiment

This paper identifies the causal effect of geopolitical uncertainty on international tourism demand (ITD). Focusing on Ukraine, we treat the Crimean crisis as a quasi-natural experiment and the post crisis period as a phase of heightened geopolitical uncertainty. Using the Synthetic Control Method, we construct a counterfactual scenario to estimate what ITD in Ukraine would have been in the absence of the uncertainty. The results show a sharp and persistent decline in ITD during the post-treatment period. Moreover, no recovery in ITD is observed even when the geopolitical risk index subsequently declined, indicating an asymmetric effect of geopolitical uncertainty on ITD. These findings deepen our understanding of how ITD in smaller states responds to potential existential threats. Based on these findings, the study offers policy insights aimed at strengthening the resilience and recovery of the tourism sector under conditions of geopolitical uncertainty.