Nexus between infrastructural development and economic growth: Evidence from Bangladesh through auto-regressive distributive lag and nonlinear auto regressive distributive lag analysis

Abstract

This study aims to scrutinize the influence of infrastructure on the economic growth of Bangladesh, employing an extensive time series analysis spanning from 1973 to 2020. Utilizing Principle Component Analysis, two distinct indices were constructed to gauge the dimensions of economic and social infrastructure. Subsequently, Auto-Regressive Distributive Lag (ARDL) and Nonlinear Auto Regressive Distributive Lag (NARDL) bound tests were employed to assess the existence of long-run relationships among the variables under examination. The findings indicate a significant and positive contribution of economic infrastructure to both long and short-term production expansion. Upon further disaggregation into negative and positive shocks, consistent results emerge. An increase (decrease) in the economic infrastructure (EI) index by one unit corresponds to an upsurge (subside) of 0.16% (0.17%) in economic growth. In contrast, social infrastructure (SI) exhibits no significant long-run association with GDP growth. The discerned pattern suggests that EI play a pivotal role in driving aggregate output, while SI display a lag. Despite this, it is imperative to underscore the importance of SI for human development. Consequently, adopting a comprehensive and strategic approach, encompassing vision, ensuring quality inclusivity, and anti-corruption measures, is imperative for Bangladesh to fully realize the transformative potential of its infrastructure investments and foster sustained economic growth.