Abstract:
The main objective of the study was to examine the long-run effect of public investment on economic
growth of Tanzania. The study was also guided by the specific objectives which first was to examine
short run relationship between public investment and economic growth, second was to investigate
the long-run relationship between public investment and economic growth and the third was to
assess the causality between public investment and economic growth. The study employed
secondary data from World development indicators (World Bank) website for the period of 32 years
(1990-2021), the data gave a whole-some understanding of the stated objective. The researcher
examined the unit root characteristic of the variables and found the variables were stationary at first
difference. The researcher employed Johansen test for co-integration to examine the existence of
long-run relationship among the variables and found that the variables are co-integrated. Using
dynamic OLS to estimate the long-run coefficients. Findings revealed that, there is a strong positive
relationship between public investment and economic growth of Tanzania. As unit increase public
investment would leads to 0.191570 increase in real GDP holding other factors constant. The short run relationship were found positive but statistically insignificance, however, the result from the
Granger causality shows that, there is a unidirectional causal relationship from public investment to
economic growth (real GDP) in Tanzania. The researcher recommended that, the government of
Tanzania through the Ministry of Planning and Finance, Parliament and policy makers should
ensuring a good policies that may influence the public investment through fiscal policy in order to
bring a positive outcome to the country’s economy in long run.
