Disentangling the Effects on the Korean Economy of the 9/11 Terrorist Attacks from the Short-Run Effects of Hosting the 2002 World Cup, Using the Cge Model

Abstract

The short-term effects of hosting the 2002 World Cup on the Korean economy are examined. Simulations using a computable general equilibrium model are carried out in a short-run framework, where the shock level was taken from the percentage changes in foreign tourism receipts observed between 2000 and 2002. Because of the dramatic events that occurred before and after 2002, the effect of these events must be removed to estimate the effects of the World Cup on the Korean economy. Using time series forecasting models, attempts are made to isolate the impacts of the 9/11 terrorist attacks from the impact of the World Cup. The results suggest that hosting the World Cup had a positive impact on the economy. This positive impact, however, is smaller than the negative impact of the 9/11 attacks. These differences explain the downturn in the Korean tourism industry and economy in 2002.