News Shocks in the data : Olympic games and their macroeconomic effects

Abstract

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.