Transportation Infrastructure and Economic Growth: Empirical Insights from Bangladesh
AbstractAs one of the fastest-growing economies in the world, Bangladesh has upgraded and invested in its land transportation sector. The objective of this paper is to examine the causal relationship between land transportation (rail and road) and economic growth in Bangladesh over the period 1973 to 2020. The Johansen’s Maximum Likelihood (ML) test and the Vector Error Correction Model (VECM) have been used in this study to look into the long-term equilibrium and short-term causation links between the variables. According to results from unit root tests, all the series under study are non-stationary at the level and stationary at their first difference. The study findings reveal that there is bidirectional causality between road transportation and economic growth. It also finds unidirectional causality running from rail transportation to economic growth. This study then applies Dynamic Ordinary Least Squares (DOLS) and Fully Modified Ordinary Least Squares (FMOLS) to examine the effects of land transportation on economic growth. The results of DOLS and FMOLS give evidence that both rail and road transportation have a statistically significant positive impact on economic growth in Bangladesh. Besides, economic growth in Bangladesh is positively and significantly influenced by both gross capital formation and the total population in the long run. Therefore, this study suggests that a solid transportation plan be kept up so that transportation infrastructure can be improved, and Bangladesh's economy can grow in the long run.
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