Construction in an Open Economy: Autoregressive Distributed Lag Modeling Approach and Causality Analysis—Case of North Cyprus
Publication: Journal of Construction Engineering and Management
Volume 139, Issue 9
Abstract
This study investigates the long-run equilibrium of the construction sector in an open macroeconomy in which the growth rate and money supply (M3) are exposed to exogenous shocks from foreign capital transfers (FCT). Specifically, the study examines the econometric relationship between M3, FCT, gross domestic product (GDP), and the construction value added (CVA), empirically determining the direction of causality among these variables for North Cyprus. Results reveal that M3 and real GDP are significant determinants of a long-run equilibrium relationship with CVA and FCT, reflecting openness of the capital market in North Cyprus. A positive significant relationship is found between M3 and real GDP in the long run. The results also confirm that CVA is indirectly affected by expansion in M3 and the overall GDP growth during 1977–2008. Most empirical studies and modeling of construction engineering and management are micro level. This study breaks new ground as it attempts to analyze the construction industry within a macro and open economy framework. The findings reported here will benefit especially professionals working on international joint ventures (IJV), interested in securing current strategic positions of IJVs within the competitive environment and formulating strategies to be placed in better performing clusters.
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Acknowledgments
The author is greatly indebted to Professor Emeritus Dr. Ozay Mehmet of Carleton Univ. and Asst. Prof. Dr. Kenan Yumurtacı (formerly of State Univ, of New York at Albany) for their contributions to this study. The author alone, however, is responsible for the contents and interpretations.
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Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 139 • Issue 9 • September 2013
Pages: 1199 - 1210
Copyright
© 2013 American Society of Civil Engineers.
History
Received: Nov 1, 2011
Accepted: Mar 3, 2013
Published online: Mar 7, 2013
Discussion open until: Aug 7, 2013
Published in print: Sep 1, 2013
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