An Investigation into the Relationship between Transportation Industry and Economic Growth in China

Based on the annual data on transportation and Gross Domestic Product (GDP) from 1980 to 2006, we analyzed the interaction between transportation industry and economic growth in China. The original data was log-transformed to reduce the variance heteroscedasticity. Based on the Augmented Dickey-Fuller unit root test, we found the data series are I (1) processes. Using the co-integration theory, we found the existence of co-integration between economic growth and transportation industry. By further using the Granger causality test, we showed a significant mutual causal relationship between the economic growth and the transportation industry. Using impulse response function analysis, we found the different effect of random impulse on each variable. Finally, conclusions were drawn based on the analyses.