Responses of selected economic indicators to construction output shocks: the case of Singapore

The volume of construction output fluctuates in response to changes in demand and supply conditions. Due to the multiple linkages that the construction industry has with other economic sectors and the entire economy, the output shock is propagated through the economic system and reflected in several economic indicators, such as the outputs of other sectors, balance of payments and general prices. A study is reported on the short-term responses of some economic indicators in Singapore following a shock in the construction output, using the Granger causality approach, the impulse response function and variance decomposition analysis. Construction output shock had significant impact on the outputs of the commerce sector and 'other services'. The heavy reliance of the Singapore construction industry on imported inputs has a direct impact on the balance of payments.