Determinants of tourism demand in Iraq: An econometric analysis of economic and political factors

The critical role of tourism as a principal economic engine is well known as an employment creator and foreign exchange earner. Countries provided with natural resources, such as Iraq, possess significant potential for the tourist sector to diversify national income and reduce reliance on oil earnings. Despite these prospects, challenges such as political instability, macroeconomic volatility, and frequent external shocks continue to affect the tourist sector in Iraq. This study conducts an empirical investigation into the factors that influence tourism demand in Iraq from 2000 to 2022, highlighting the correlation between tourism demand and key macroeconomic indicators. Explanatory variables, including Gross Domestic Product (GDP), the Real Exchange Rate (RER), and the Consumer Price Index (CPI), are included along with two dummy variables designed to reflect the disruptive impacts of the COVID-19 pandemic (2020–2021) and the ISIS conflict (2014–2017). The Autoregressive Distributed Lag (ARDL) methodology is utilised to assess both short- and long-term dynamics and to ascertain the presence of cointegration. The results indicate that tourist arrivals in the short run are significantly influenced by macroeconomic variables; specifically, GDP and the exchange rate demonstrate considerable positive impacts, whereas inflation and external shocks the COVID-19 pandemic and the ISIS conflict diminish tourism demand. Long-term estimates confirm a stable cointegrating relationship, with GDP and the exchange rate continuing to have positive effects on tourism demand, while inflation continues to have negative effects. Structural shocks have adverse impacts, highlighting the sector's susceptibility to geopolitical events and global health-related crises. Empirical results from both the short-term and long-term estimates indicate that several policy implications can be drawn to help offset Iraq's focus on an oil-dependent economy by stimulating tourism demand. The long-term positive effect of GDP on tourist arrivals indicates the need to establish and ensure macroeconomic stability and accelerate economic growth. Iraqi policymakers must, therefore, prioritise structural reform, increase investment in infrastructure and stimulate development of the private sector to develop a healthier and more attractive economic setting influenced by both domestic and international tourists.