Granger Causality Test between Infrastructure Investment and Economic Growth for Shanghai

Infrastructure plays a very important role not only in the economic development but people's living standards, vice versa, the growth of the economy will promote the construction of infrastructure. They are closely interacted with each other. But the real cause and effect relationship between the growth of economy and infrastructure investment is still an argument. This paper processes the historical time series data of Shanghai, to qualitatively analyze the general relationship between infrastructure and economic growth based on Granger Causality Test. The result of ADF test and granger causality test empirically proves the investment of infrastructure in Shanghai has promoted the local economic growth although this effect was in lag 3, and on the other side GDP is the Granger cause of infrastructure investment. Among different aspects of infrastructure, transportation investment is the highest Granger cause to GDP. The electricity, post and telecommunication investment are not the Granger cause of GDP, but the investment in these fields will increase with the growth of economy. This granger causality test provides not only an important understanding for Shanghai's urban economy, but also has reference value for how to improve the efficiency of development.