Causal relationship between construction investment policy and economic growth in Turkey

The construction industry in countries experiencing severe economic crisis has vital importance to get out of stagnation because of its direct relations with 200 different sectors. In this study, the relationship between the construction growth data (infrastructure, building and residential (public), building and residential (private) investment) and gross domestic product (GDP) is examined for Turkey. To this end, Engle–Granger cointegration, error correction model (ECM) and Granger causality tests were applied in order to determine the aforementioned relation. It has been found that the infrastructure and building–residential investments have direct relations with the GDP and have causality effects.

Research highlights
► We analyze the construction investment policy and economic growth in Turkey.
► Long term infrastructure investments are not affected by economic shocks in short run.
► BRPU (building and residential (public)) investments are affected by short term shocks.
► Public investments in developing countries exert long term effects on GDP.