Investigating the causal relationship between transport infrastructure, transport energy consumption and economic growth in Tunisia

Abstract

This study investigates the causal relationships between transportation infrastructure (rail and road), the transport value added, gross capital formation, transportation energy consumption and transport CO2 emissions in Tunisia over the period of 1971–2012. We use the Johansen multivariate cointegration approach, generalized impulse response functions and variance decomposition technique to examine the effect of transportation infrastructure on economic growth and the environment. These findings show the existence of unidirectional long run causality running from transport value added, road transport related energy consumption, transport CO2 emissions and gross capital formation to road infrastructure. It also finds a unidirectional long run causality running from railway infrastructure, the transport value added, gross capital formation and transport CO2 emissions to rail transport related energy consumption. Besides, we find a unidirectional short run causality running from the road infrastructure to transport value added and a unidirectional short run causality running from road transport related energy consumption to transport CO2 emissions. Furthermore, there are unidirectional short run causality running from railway infrastructure to rail transport related energy consumption and a unidirectional short run causality running from transport CO2 emissions to rail transport related energy consumption. These results are very important in terms of the choice of government policy decisions. Our results cast a new dimension to the importance of investing in infrastructure as a promising device to generate higher economic growth.