Shadows of Uncertainty: Unraveling the Impact of Economic Policy Uncertainty on Tourism-Driven Energy Consumption in Macau

This research analyzes the influence of economic policy uncertainty (EPU) on energy consumption driven by tourism in Macau, employing a structural vector autoregression (SVAR) model with sign restrictions. The SVAR model facilitates the identification of EPU shocks by imposing sign restrictions on impulse responses, providing a nuanced understanding of the dynamic effects of uncertainty. Employing quarterly data from the first quarter of 2002 to the fourth quarter of 2024, the findings demonstrate that EPU shocks result in sustained reductions in GDP, hotel occupancy rates, and energy usage. Our analysis highlights the significant role of Mainland China’s policy uncertainty in influencing Macau’s economy, emphasizing the vulnerability of tourism-dependent economies to policy-induced variations. The novelty of this research lies in its integrated framework, exploring the interconnectedness of EPU, tourism, and energy consumption, thus filling a gap in the existing literature. Additionally, this study contributes to sustainability research by exploring how energy consumption in tourism-dependent economies is intricately linked to policy uncertainty and how sustainable energy management strategies can help mitigate the adverse impacts of these uncertainties. Our findings provide key insights for policymakers aiming to enhance economic resilience and sustainability, underscoring the importance of reducing uncertainty through transparent policies and economic diversification.