. The effect of Public investment on Developing Countries Economies:

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.