The Impact of Hosting a Major Sport Event on the South African Economy

When interpreting the findings of the different scenarios, it is essential to keep the type of
closure used in mind. The simulation results of the shocks applied to the economy depend to
a large extent on the model closure. In the standard short run closure, variables constraining
real GDP from the expenditure side such as the total amount of private consumption,
investment, and government consumption are exogenous and the percentage change to
these variables will be zero. In this specific simulation, two exogenous variables constraining
real GDP from the supply side, capital stock and technological change, are shocked. The
level of employment and the trade balance are endogenous, and their effects on real GDP are
therefore solved within the model. This particular closure also allows for real household
consumption to be endogenous. An in-depth discussion on the closure of a model can be
found in Horridge (2000).

Keeping the restrictions of the specific closure used in mind, and the nature of the different
simulation scenarios², the following macroeconomic results were obtained for the given
shocks applied to the economy.

Table 1.1 Selected macroeconomic variables

It is clear that all the selected macroeconomic variables show an improvement after the
shocks are applied. The separate impact of the increase in the capital stock and the technical
change to the construction and transport industries, as indicated by scenarios 1 and 2, show
very similar results. In scenario 1, real GDP growth (x0gdpexp) increases with 0.49 percent
compared to 0.48 percent in scenario 2, equating to a contribution of more than R5 billion to
the economy in each case. Naturally, when these two effects are combined in scenario 3, the
overall impact on real GDP increases to over R10 billion. The simulation results for scenario 3
indicate that employment levels will improve by 0.38 percent due to the shock, creating more
than 50,000 jobs. The increase in construction activity during this pre-event phase is expected

² Scenario 1 refers to the simulation where the capital stock of the construction and transport industries are increased
with 10 percent. Scenario 2 refers to the simulation where technical change to the both the construction and transport
industries improves productivity with 5 and 10 percent respectively. Scenario 3 refers to the simulation where the
overall impact of both shocks on the economy is measured simultaneously.

<<   6   7   8   9   10   11   12   >>

More intriguing information