Influence of inflation on the construction sector and economic growth in selected countries: A continental comparison

Abstract

Whether in developed or developing countries, the construction industry had a vital part to play concerning the GDP throughout the ages. The increasing inflation since the pandemic affected numerous main sectors, no doubt construction industry is not different and has not been immune to. The presence of inflation and resultant interest rate influence the growth of the economic sector. There have been no reported studies to evaluate the impact on construction industry, nor a comparative analysis at continental level for selective countries. The study designed to explore the long-run (LR) and causality (CA) of the inflation and interest rate on the GDP and the construction sector depending on the four selected variables and models from 1991 to 2022 on nine selected countries from Americas, Asia and Europe that are facing ever-rising inflation in most recent years. Data of the study have been collated from official databases, where the sources are introduced. The research concluded that the interest rate and inflation have positive bidirectional long run estimates in seven countries which that impact negatively on the economic growth. However, it is also found that the impact of inflation and interest rate on the GDP and the construction sector differs from country to country. It is shown that the high inflation and interest rate issue can also pushes GDP upwards, not necessarily on real value.

Keywords

• Inflation
• Interest rate. GDP
• Construction sector
• Economic growth
• Long-run