Public Investment and Economic Growth in Bangladesh: A Time Series Approach

Abstract

This paper attempts to examine the causal relationship between public investment and economic growth in Bangladesh from 1972/73 to 2013/14. Cointegration analysis indicates a long-run relationship between the two variables. A unidirectional causality from public investment to growth is found on the basis of Error Correction Model (ECM). The main result of the study is that public investment invariably leads to economic growth. As a policy suggestion, efficient management of public investment should be conducive to higher productive capacity which will lead to higher growth in Bangladesh.

Keywords: Public Investment, Economic Growth, Cointegration, Error Correction Model, Bangladesh.