Analysis of the Causality Links between the Growth of the Construction Industry and the Growth of the Macro-economy in Ghana
Date
2007
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Abstract
A vibrant construction industry in a developing country, that mobilizes human and local material resources in
the development and maintenance of buildings, housing and physical infrastructure, is an important means to
promote increased local employment and accelerate economic growth. Ghana, a country of about 22 million
people, currently has one of the fastest growing economies in West Africa. The Government of Ghana (GOG)
has recently set a target of annual economic growth rate of 8% and above, up from annual growth rates of 5–6%
in the past five years (2001–05). It intends to use the agricultural sector as the major vehicle for achieving such
high growth rates in order for the country to reach the status of a middle income country by 2015. Surprisingly,
the construction industry was left out from the list of major growth drivers of the economy. We contend that
with the construction industry currently making up the third largest sector of the economy, special attention
should be given to this industry as one of the main drivers of economic growth in Ghana. Therefore we
conducted a study to analyse the causality links between the growth in the construction industry and the growth
in the macro-economy of Ghana, measured by the gross domestic product (GDP), to ascertain whether the
construction industry can be used to lead the entire economy on a growth path. The analysis was based on a
simple Granger causality test using time series data from 1968 to 2004. We showed that growth in the
construction industry Granger-caused growth in GDP, with a three-year lag. The construction industry needs
to be considered as one of the major drivers of economic growth in Ghana.
Description
Keywords
Construction industry, gross domestic product, economic growth, Ghana, Granger causality test, West Africa
Citation
Construction Management and Economics, Volume 25 Number 9, pp. 951-961