Author(s)

D. Salami & I. Kelikume

Abstract

This paper estimates the linkage between the manufacturing sector and other sectors of the Nigerian economy with the aid of a more dynamic estimating tool. The paper departs from the static Leontief’s input-output framework used by earlier studies and adopts the Granger causality test and the vector auto regression method, to determine the impact of changes in manufacturing output on the output of the other sectors and the effects of changes in output of other sectors on the manufacturing sector. Using quarterly time series data over the periods 1986 to 2010 the result shows a weak linkage between the manufacturing sector and other sectors of the Nigerian economy. The manufacturing sector output showed no causal relationship with real economic activities as measured by the real gross domestic product. It also had no causal relationship with the financial sector output. Only two major sectors building and construction and hotel and restaurant seems to be driving the manufacturing sector with the later exhibiting a bi-directional relationship with the manufacturing sector. Specifically, it takes approximately four to six quarters for most sectors to respond to the impact of shocks emanating from the other sectors the economy. Keywords: manufacturing sector, sectorial linkage, vector autoregression, granger casualty, real gross domestic product. 1 Introduction The manufacturing sector makes significant contribution to economic development through its income and employment linkages with other sectors of the economy in both developing and developed countries. Prior to the twenty

Keywords

manufacturing sector, sectorial linkage, vector autoregression,granger casualty, real gross domestic product.