Research Report Report Paper: News Shocks in the Data: Olympic Games in Their Macroeconomic Effects, Brückner, M. and Pappa, E. (2015) Mauravi Jukar U6936619 1. INTRODUCTION I have selected to replicate and extend the paper titled ‘News Shocks in the Data: Olympic Games in Their Macroeconomic Effects’, written by Brückner, M. and Pappa, E. (2015). The paper is one of the first in literatures to use macroeconomic models to interpret the effect of specific news announcements, such as a mega event like the Olympic Games, on the participating economies. Brückner and Pappa (2015), analyse the bidding process for the Olympic Games and use the anticipation effects associated with the games as the key to understand the macroeconomic effect caused by the news of the Olympics, among the nations that participate in the bid and get to host it. The paper concludes to confirm that the economies participating in the bid, experience an increase in investment, consumption and output, well in advance as a result to the news shocks. The process of participating in the bid and finally selecting a host nation, is almost a decade long process; with complex stages of evaluation and ranking by the International Olympic Committee (IOC), who are responsible for the final selection of a host country. The report makes it interesting to understand the economics behind the bidding and hosting of the Olympic Games, however, I am motivated to extend this paper by challenging the ethical nature of the central assumption of the paper, which is based on the random assignment of selecting a host country. 1.2 OVERVIEW OF THE SELECTED PAPER Using modern economic theory as the base for interpreting the results in the report, Bruckner and Pappa (2015) show that the news shock generated from the news of an upcoming Olympic Games, can be mapped into a macroeconomic model as changes in government investment that increase private productivity. The paper’s empirical results show that the nations participating in the bid for the Olympic Games, notice an increase in output growth, investment and private consumption quite significantly about 9 to 7 years before the actual event. However, after the selection of a host country, the investments tend to decrease in the participating bidding nations whereas the host nation continues to experience a positive growth in the macroeconomic variables at least 5 to 2 years before the Olympic Games are held. The International Olympic Committee (IOC) is responsible for carefully evaluating and making the final decision, selecting the host city for the Olympics. After many technical evaluations, the top 5 bids are shortlisted and a host city is selected 7 years before the actual Olympic Games (Bruckner and Pappa, 2015). The IOC members, ideally, should be of an unbiased nature. However, the IOC’s selection process is highly secretive and subjective; considering the instances that indicate that the IOC tends to have various biases or favouring bids from countries that have sustained high rates of economic growth. Hence, as an extension to the selected paper, I challenge the authors’ analysis which is based on the random selection of a host city or host nation by the IOC. The extension for the paper uses a hypothetical test to check whether the IOC has any level of bias while selecting a host city for the Olympic Games. As a result, it can be noticed that the IOC does in fact show a high level of preference while selecting a host city; with a biasness towards cities located either in Europe or in North America, due to the various political and socio-economic motives.