Infrastructure and economic growth of Tanzania

Abstract

This paper examines the correlation between infrastructure and economic growth rate in Tanzania. In particular it uses time series data from 1990 till 2017 on time series models that use infrastructure variables among the explanatory variables. Correction Model (VECM) is involved to examine for the presence of a long-term association in the equation only. Findings show that all variables are integrated of order I(1),and the model are within one or common trend. Further results are that the economic growth rate un-directionally granger causes the infrastructure variables in our model. The long term estimation of the impact of infrastructure on economic growth rate show a 100 percent increase in infrastructure of road coverage raises economic growth by 22.8. Further results show a 100 a percent increase telephone coverage is associated with 17 percent increase in economic growth. In the same way change in railway network corresponds to 13 percent increase in the rate of economic growth. Finally Port handling improvement corresponds to 20 percent increase in economic growth. The paper concludes that infrastructure investment has significant effect on economic growth rates and should strategically be linked within the economic growth objectives.