Does the size of the tourism sector influence the economic policy response to the COVID-19 pandemic?

Abstract

ABSTRACT The COVID-19 pandemic has resulted in an unprecedented slowdown of economic activity worldwide, with an especially negative impact on the tourism sector. The adoption of international travel restrictions to contain the spread of the COVID-19 outbreak has brought much of the global tourism industry to a virtual standstill. Governments have introduced a range of economic stimulus packages designed to mitigate the negative effects of the pandemic, including its impact on travel and tourism. This article investigates whether the size of the tourism sector influences the economic policy response to COVID-19 pandemic using data from 136 countries. The findings show that the larger the tourism sector, the larger the economic stimulus package introduced by governments globally. Furthermore, we find that the size of the tourism sector is positively associated with both fiscal and monetary policy responses to the pandemic. The findings suggest that countries with larger tourism sectors adopted more aggressive economic stimulus packages to mitigate the impact of COVID-19 pandemic and reinvigorate floundering economies.