The World Cup and Economics 2018

It is that time. Summer is in the air, the greatest competition in the world is about to begin, and we at Goldman Sachs Research have published the sixth edition of our book on the World Cup and Economics.This traditionally eccentric mix of economic insight, tenuous correlations and footballing views remains one of our most popular publications, and we invite you to use it as a guide and companion through the upcoming competition.

We have turned again to a famous guest contributor to provide an expert perspective on the competition. Carlo Ancelotti, famous Italian player and legendary manager, shares his thoughts on what it takes to win the World Cup; his top tips – Brazil and Spain; and how the competition in Russia could be different. As Clemens Grafe describes, a World Cup tournament in Russia is long overdue, but football in Russia has some shortcomings in common with the economy, and the preparation going into the opening game has been less than ideal.

Our economists from across the world have a page on the 31 other participating countries. The economic analysis is thoughtful, the footballing assessment is balanced, but the conviction level on their respective country performance is overly strong. If only they had the same strongly held beliefs about their regular views.

The core of the publication is the forecasting model – where this year, Adam, Manav and Nicholas augment the typical team level data with player level characteristics. After hours of number crunching, 200,000 probability trees, and 1 million simulations, some of the results are strikingly intuitive: England meets Germany in the quarters, where Germany wins; and Germany meets Brazil in the final, and Brazil prevails. For the doubters out there, this final result was cross-checked in excruciating detail by our (German) Chief Economist Jan Hatzius! The match-by-match probabilities – which we will update throughout the competition – produce some genuinely interesting results. While Germany is more likely to get to the final, France has a marginally higher overall chance of winning the tournament, and along with Brazil, Germany, and France, Portugal squeaks into the semis, ahead of Argentina.

We also include a pull-out calendar and the World Cup dream team, selected by you, our clients from across the world. Based on the several hundreds of votes submitted, we have narrowed the list down to a final 11 playing in a 4-3-3 formation. As in previous editions, Lorenzo Incoronato has highlighted some key macro trends in World Cups, and taken the ‘dodgy correlations’ featured in 2014 to new heights, showing how the ability of strikers to score from the spot is not unrelated to the ability of central bankers to hit their inflation targets.

We hope you enjoy the publication and the World Cup, and it provides some break from these difficult markets.

Good luck to all the teams and our clients.

Research Report

The World Cup and Economics 2018

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Sven Jari Stehn
Senior Economist, Global Investment Research
Kamakshya Trivedi
Co-head of Global Foreign Exchange and Emerging Markets Strategy, Global Investment Research
Nicholas Fawcett
Global Investment Research
Manav Chaudhary
Global Investment Research
Lorenzo Incoronato
Global Investment Research

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