The quantitative boost that the positive exogenous shock is expected to produce could be evinced from various figures like employment rate, GDP, FDI inflows as well as rate of domestic investment. However the qualitative aspects of the same could be represented by betterment in the standard of living though this aspect too could be measured through estimating a few selective variables like deterioration in the poverty rate of the concerned nation, betterment in the consumption basket of the economy (estimated by means of rising demands for premium products), etc.
But these are only indirect aspects of the economic impact that such a global event had over the developing nation. Nonetheless, an in depth study into the present topic could aware national governments of developing nations highly about the possible preparations it must undertake in order to make way for a global event and could also teach the producers about the provisions they must keep in supply in order to meet the increased demand. Hence, the research objectives in the present case could be articulated as follows – Firstly, the research tries to pick up the fundamentals which actually took care of the infrastructural aspects in a developing economy like South Africa prior to hosting a global event like the Soccer World Cup of 2010.
Secondly, the arenas which the domestic producers had to make provision in order to deal with the high demand will be assessed in the present paper. Thirdly, the economic impact that the event created over the nation will be evaluated for encouraging any developing nation interested in hosting such events in future. Literature Review Positive demand shocks are likely to create a heavy impact upon the economic development of a nation (Devlin & Estevadeordal, 2003).
In most of the cases, they lead to an appreciation in the equilibrium price level as it might not be possible to make adjustments in terms of aggregate output over the short run (D’Souza, 2009). However, over the long run, the full employment level of the concerned nation grows thus pushing up the GDP of the economy (Hall & Lieberman, 2009). On the other hand, as short run adjustments are difficult to make, the ultimate outcome is an appreciation in the price rate of the economy which in turn pushes up the domestic rate of exchange.
This appreciation might have detrimental effects upon the international trade scenario as export demand becomes unappealing (Sinclair, Driver & Thoenissen, 2005). However, the influx of foreign direct investment as well as institutional investment is worth mentioning as investors from all over the world pour in their resources in the nation with an eye on the hefty returns that those investments are going to pay back.
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