Tourism Demand in Asia: The Role of Economic, Institutional and Governance Factors

This paper investigates the determinants of tourism in selected Asian economies over the period 1995–2024, employing the Augmented Mean Group (AMG) estimator to account for cross-sectional dependence, unobserved common factors, and heterogeneous country-specific dynamics. As a robustness check, method of moments quantile regressions (MMQRs) are applied to examine how the effects of GDP, consumer prices, foreign direct investment (FDI), trade openness, and institutional quality vary across the distribution of tourism inflows. The results indicate that GDP consistently promotes tourist arrivals, particularly in countries with lower to median tourism inflows, while higher consumer prices reduce tourism demand across all quantiles. FDI and trade openness positively influence tourism, with FDI’s impact amplified in countries with stronger institutional quality. The MMQR analysis further highlights substantial heterogeneity: emerging economies benefit more from FDI and institutional reforms, whereas advanced economies rely primarily on GDP growth, trade integration, and high-quality tourism services. Overall, the findings underscore the complementary roles of macroeconomic fundamentals, foreign investment, trade, and governance in supporting sustainable long-run tourism growth in Asia, while demonstrating the value of distributional analysis for capturing heterogeneous effects.