Service and Construction Sector of Malaysia: Causality Link (1991-2013)

Abstract

The number of research studies has been conducted over the importance of service and construction sector in an economy and confirmed that these two sectors are always being closely associated to the aggregate economy and play crucial role in the socio economic development of a country. The objective of this study is to examine the link between the construction and service sector of Malaysia during the last two decades by using time series econometric analysis. The Granger causality approach is used to obtain the objective of the study. The results of the study suggest that there is a uni-directional (one way) association between the service and construction sector in Malaysia i.e. construction sector to service sector. The construction sector plays a significant role to motivate the economic activities of the service sector in Malaysia and the service sector take 6 months (two quarters) to absorb the impact of a shock coming from the construction sector. The results of the study are important and useful for developing future policies for the construction and services sectors of Malaysia. The results are also important and informative for interested parties of the sectors.