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Causality between the Construction Sector and Economic Growth: The Case of Saudi Arabia

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  • Albdulkarim K. Alhowaish

    (University of Dammam)

Abstract

This study empirically investigates the relationship between construction flow and economic growth for Saudi Arabia during the 1970¡V2011 period. Integration and cointegration techniques are applied to investigate the relationship between the construction sector and economic growth. Given the fact that Saudi Arabia is an oil-rich country, oil revenue has also been included in the model as a conditioning variable. The findings reveal that there is strong causality that runs from economic growth and oil revenues to the construction industry with feedback effects that only run from construction to economic growth (i.e. bi-directional relationship). However, the construction industry does not Granger-cause oil revenues in the long-run (i.e. uni-directional relationship). The findings also reveal that there exists no causal relationship between economic growth and oil revenues in the long-run. Economic growth and oil revenue are "independent¨ effects on construction growths in the long-run. However, oil revenues have significant effects on economic growth just in the short-run. Therefore, oil revenues play a critical role in economic growth in the short-run and therefore, the growth of the construction industry in the long-run. The accuracy of the estimated results is validated by performing several diagnostic tests.

Suggested Citation

  • Albdulkarim K. Alhowaish, 2015. "Causality between the Construction Sector and Economic Growth: The Case of Saudi Arabia," International Real Estate Review, Global Social Science Institute, vol. 18(1), pages 131-147.
    • Handle: RePEc:ire:issued:v:18:n:01:2015:p:131-147
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    Citations

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    Cited by:

    1. Wesam Salah Alaloul & Muhammad Ali Musarat & Muhammad Babar Ali Rabbani & Muhammad Altaf & Khalid Mhmoud Alzubi & Marsail Al Salaheen, 2022. "Assessment of Economic Sustainability in the Construction Sector: Evidence from Three Developed Countries (the USA, China, and the UK)," Sustainability, MDPI, vol. 14(10), pages 1-36, May.
    2. Hatem Altaee, 2018. "Trade Openness and Economic Growth in the GCC Countries: A Panel Data Analysis Approach," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 11(3), pages 57-64, December.
    3. Su Han Chan & Ko Wang & Jing Yang, 2016. "The Pricing of Construction Loans," International Real Estate Review, Global Social Science Institute, vol. 19(4), pages 411-434.

    More about this item

    Keywords

    Construction Sector; Economic Growth; Oil Revenues; Granger Causality; Saudi Arabia;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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