Transport Infrastructure, Foreign Direct Investment, and Economic Growth in Tunisia: Evidence from a VAR Model

Ben Soltane, Bassem (2025): Transport Infrastructure, Foreign Direct Investment, and Economic Growth in Tunisia: Evidence from a VAR Model.

Abstract

This study examines the dynamic interrelationship between transport infrastructure, foreign direct investment (FDI), and economic growth in Tunisia over the period 1996–2022. Motivated by the hypothesis that transport infrastructure stimulates FDI, which in turn enhances GDP per capita, the analysis adopts a Vector Autoregression (VAR) framework to capture the bidirectional linkages among the three variables. The study relies on annual time-series data drawn from the World Bank Open Data platform and the International Road Statistics (IRS). The results confirm that transport infrastructure positively influences FDI inflows, and that FDI subsequently contributes to economic growth, revealing a reinforcing cycle wherein improved infrastructure attracts investment, which then drives development. Granger causality tests support these directional links, while impulse response functions and variance decomposition illustrate the transmission mechanisms and evolving contribution of each variable to economic performance. These findings underscore the strategic importance of transport infrastructure in Tunisia’s development model and highlight the need for spatially inclusive investment, macroeconomic stability, and institutional efficiency. The study also addresses practical challenges, such as fiscal constraints and political uncertainty, and calls for future research focused on infrastructure typologies, private sector participation, and economic resilience in the face of global disruptions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Transport infrastructure, Foreign Direct Investment (FDI), Economic growth, Vector Autoregression (VAR), Tunisia.
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

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