• Relationship between construction expenditure and economic growth in sub-Saharan Africa

    Author(s):

     Dennis Boahene Osei*a, Peter Borkly Aglobitseb and Isaac Bentum-Enninc 


    denniskwakuboahene@gmail.com
    2024-08-01 05:43:03

    88 Downloads 230 Views

    Abstract

    Does construction expenditure matter in economic growth, and does the Bon curve hold in sub-Saharan Africa (SSA)? This paper answered these questions by re examining relationship between construction expenditure and economic growth for 33 countries in SSA using an annual data spanning from 1990 to 2014. The main estimation techniques employed were the Panel Autoregressive Distributed Lag (ARDL) model and the Dumitrescu Hurlin Panel Causality test. The results revealed a positive relationship between construction expenditure and economic growth both in the long run and short run, although the latter was statistically insignificant. There was also a non-linear (inverted U-shaped) relationship found between construction expenditure and economic growth with a turning point of 11.28%, suggesting that the Bon curve holds for SSA. The study further showed a bidirectional relationship between construction expenditure and economic growth, at least for a four-year lag period. These findings highlight the importance of the construction industry to economic growth in SSA and hence, the study recommends that policy makers and various governments in SSA need to devote a large share of output to propping up the industry since the multiplier effect is very large for developing countries. Moreover, policymakers in SSA need to be circumspect in controlling the level of construction expenditure in the long run because expansion of construction expenditure beyond the turning point may not bring the desired impact on economic growth.  

    Keywords
    Construction; Construction expenditure; Economic growth; Bon curve.

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