Bangladesh Bank Training Academy Journal

Abstract

We empirically examine the dynamic causal relationship between total debt, public investment and export in Bangladesh during the period of 1981 to 2015. We specifically investigate the impact of accelerating total debt on public investment. Considering the significance of export performance in Bangladesh, we also examine the debt export causality. A Granger causality based Vector Error Correction Model (VECM) is employed to examine the existence of causality among the variables. The results reveal no causality evidence, running from total debt and export to public investment in the long run. However, there exists a uni directional causality both from export and public investment to total debt in the long run. Similar to the long run, total debt and export have no impact on public investment in the short run as well. Therefore, our results suggest that total debt has no positive impact on public investment, neither in the short run nor in the long run in Bangladesh.