Effects of The Construction Sector on Economic Growth and Financial Markets: The Case of Turkey (İnşaat Sektörünün Ekonomik Büyüme ve Finansal Piyasalar Üzerindeki Etkileri: Türkiye Örneği)

The construction sector, which provides significant employment with its labor-intensive structure, is one of the most important growth means in developing countries like Turkey. It stimulates economic activities in the other sectors that it interacts with. The study aims to analyze the effects of the construction sector on Turkey's economic growth and financial markets. The data of real Gross Domestic Product (GDP), Construction Production Index, Borsa Istanbul (BIST) 100 index, and the banking sector domestic credit volume data for 2002:Q1-2019:Q3 are used to reveal the impacts of the construction sector on economic growth and financial markets in Turkey. Moreover, events affecting the Turkish economy within the analysis period are estimated by Bai and Perron's (1998, 2003) method, and accordingly, ten different dummy variables are included in the analysis. Long-term analyses are performed using the Dynamic Ordinary Least Squares (DOLS) method. The findings indicate that a 1% increase in construction production index has increased national income by 0.68%, BIST100 index by 1.80%, and domestic credit volume by 2.35% in Turkey during the 2002:Q1-2019:Q3 period. Short-term analyses are also conducted by the DOLS method, and it is found that the growth in the construction sector affects economic growth and financial markets positively and statistically significant in the short term. The results also indicate that error correction mechanisms of the models operate.