Impact of macroeconomic variables on the construction sector

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

The construction industry is the main accelerator of the country’s economy. Therefore, research studies on the impact of economic influences on the construction industry are vast. However, finding the main macroeconomic factors is limited in the Albanian industry (Puci et al., 2022). To fill the research gap, this paper aims to identify the macroeconomic variables that influence the sector of construction through an empirical investigation. To achieve this objective, an empirical study is done where the data set is defined as panel data. The model includes four independent variables: gross domestic product (GDP) growth, inflation rate, exchange rate, and interest rate; whereas the dependent variable is represented by return on assets (ROA) for 36 audited companies from 2010–2020, making a total of 396 observations. Multiple regression through EVIEWS 10 software is used to identify any potential relationship among them. The results of this paper indicate that all the variables were statistically significant; GDP growth and interest rate were proved to positively impact the profitability of companies operating in the construction sector; whereas the two other variables such as inflation rate and exchange rate negatively impact ROA for the period examined. Lastly, the paper emphasizes the role of the government as an investment-led industry; for the nation’s prosperity construction sector is ultimate. Considering the role of construction in the development of Albania, it is necessary for the government to pay adequate attention to this sector.

Keywords: Profitability, Construction, Macroeconomic Variables, Regression, Panel Data

Authors’ individual contribution: Conceptualization — J.P.; Methodology — J.P. and A.D.; Formal Analysis — J.P. and A.K.; Writing — Original Draft — J.P., A.D., and A.K.; Writing — Review & Editing — A.D.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: The Authors would like to thank the XVI IBANESS Congresses Series on Economics, Business and Management held on March 12–13, 2022, in Plovdiv, Bulgaria.

JEL Classification: B22, C3, C46, C58, E4

Received: 16.08.2022
Accepted: 16.01.2023
Published online: 18.01.2023

How to cite this paper: Puci, J., Demi, A., & Kadiu, A. (2023). Impact of macroeconomic variables on the construction sector. Corporate & Business Strategy Review, 4(1), 22–30. https://doi.org/10.22495/cbsrv4i1art2