The Animal Spirits of Sport Events: the Effect of the UEFA European Championships on GDP and Economic Confidence

1 Introduction Mega sport events are considered to be a showcase for the host country and an opportunity to strengthen and shape their cultural identity for participating states (Boyle, 2009; Roche, 2000). They are able to attract the attention not only of fans and aficionados, but also of more casual viewers, as they are perceived as a moment of "collective identification and community expression" (Boyle, 2009). Indeed, mega sporting events had high and steadily growing international media coverage in the past decades (Müller, 2015), while also attracting a considerable flow of those who the UNWTO defines as "sport tourist" 1 . For example, the recent men’s FIFA World Cup held in Qatar broke the previous record of TV audience number 2 , the Olympic Games of Tokyo 2020 have been watched by more than three billion people 3 and the tourism impact of the last mono-host UEFA European Cham- pionship of France 2016 is estimated arounde500.6m (Gouguet & Lepetit, 2017). As such, many believe that these events might boost the economy of the host’s and the winner’s countries: from one side, the host enjoys both the showcasing effect of high media coverage and the tourism multiplier (Archer & Fletcher, 1991; Archer et al., 1990); from the other side, winning a prestigious competition as the UEFA European Championship (EC from now on) or the FIFA World Cup (WC from now on) can boost both consumers and businesses’ optimism 4 , increasing their confidence and possibly trig- gering an economic expansion 5 moved by these self-fulfilling beliefs called "animal spirits" (Akerlof & Shiller, 2010; Bidder & Smith, 2012; Carroll et al., 1994; Dos Santos Ferreira & Dufourt, 2006; Farmer & Guo, 1994; Howitt & McAfee, 1992). On the other hand, Forbes argues that the economic contraction following the short-term boost is so strong that it results in a "Winner’s Curse" for the winner of the FIFA WC 6 . This thesis follows the paper "A Kick for the GDP: The Effect of Winning the FIFA World Cup" (Mello, 2022) and it will focus on the effects of the UEFA EC on the host and the winning country through an econometric approach. The goal is to establish the presence of a causal link between host- ing and/or winning the UEFA EC and the economic fluctuations following it. In particular, this thesis will first be focused on whether the GDP growth rate increases in the quarters after winning and/or hosting the UEFA EC and it will later shift the analysis on the change in Business- and Consumer- Confidence Indexes in the months after the tournament was held. I will follow an approach similar to Mello (2022), in which the author provided causal evidence of a short-term boost for the winner of the FIFA WC: I will first start with a preliminary analysis in a dynamic setting by pooling and com- paring treated and untreated countries; then I will implement the Synthetic Difference-In-Differences approach (SDID) proposed by Arkhangelsky et al. (2021) in order to compare winning and hosting countries to their respective synthetic counterfactual, which are generated through the time series of the controls specifically to ensure the parallel trends assumption. This strategy will be applied to both the quarterly GDP growth rate data and the monthly BCI and CCI data. 1 https://www.unwto.org/sport-tourism 2 https://www.fifa.com/tournaments/mens/worldcup/qatar2022/news/fifa-world-cup-delivering-record-breaking-tv- audience-numbers 3 https://olympics.com/ioc/news/olympic-games-tokyo-2020-watched-by-more-than-3-billion-people 4 https://www.bloomberg.com/news/newsletters/2022-12-24/world-cup-win-lifts-up-argentina-s-economic-mood- new-economy-saturday 5 https://www.bloomberg.com/news/articles/2022-12-16/winning-2022-fifa-world-cup-could-bring-gdp-boost-to- france-or-argentina#xj4y7vzkg 6 https://www.forbes.com/sites/allenstjohn/2014/07/13/world-cup-gdp-curse/?sh=2771f9447db0 3