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News Shocks in the Data: Olympic Games and Their Macroeconomic Effects
Author(s) -
Brückner Markus,
Pappa Evi
Publication year - 2015
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12247
Subject(s) - bidding , consumption (sociology) , investment (military) , economics , monetary economics , government (linguistics) , panel data , macroeconomics , econometrics , microeconomics , political science , social science , linguistics , philosophy , sociology , politics , law
We examine the macroeconomic effects of bidding for the Olympic Games using panel data for 188 countries during the period 1950–2009. Our findings confirm that economies react to news shocks: investment, consumption, and output significantly increase 9 to 7 years before the actual event in bidding countries. Hosting countries also experience significant increases in investment, consumption, and output 5 to 2 years before the hosting of the Games. Mapping the Olympics into a macroeconomic model, we show that we can match our empirical findings if we assume that an Olympic bid represents news about increases in government investment.