The Sydney Olympics, seven years on: An ex-post dynamic CGE assessment, Centre of Policy Studies Monash University Working Paper G-168

A recent development in ex-ante analysis of mega events has been the use of computable general equilibrium (CGE) models. CGE models represent an improvement on the standard input-output model, since they incorporate fixed factors and substitution effects. However, like input-output, the method is still subject to the risk of over-optimistic estimation of shocks, such as projected induced-tourism expenditure (one of the major effects with which the model is shocked). Ex-post econometric studies tend to find little evidence of the sporting-event induced booms that ex-ante modelling usually predicts. In our previous ex-ante CGE modelling of mega events, we have attempted to overcome this problem by conducting sensitivity analysis regarding the size of the tourism shocks and the degree of slack in the labour market, since these are the two major drivers of the results. This paper takes a new approach – an ex-post CGE modelling exercise. It examines the economic effects of the Sydney 2000 Olympics using historical simulations with a multiregional dynamic computable general equilibrium model. The historical simulations are used to elucidate the extent to which observed changes in tourism and sports related exports are due to the Games, and the extent to which they are due to unrelated factors, such as movements in national and regional real exchange rates. Using this new information, and Games-specific shocks (such as ex-post construction costs), we then conduct a year-on-year simulation of the Games in order to obtain improved estimates of the effects of the Sydney Games that are consistent with historical information. 1