What is Vector Auto-Regressive Model (VAR)

Infrastructure development is considered a key factor in promoting economic growth and attracting foreign investors for sustainable production and productivity. Conversely, inadequate levels of infrastructure constrain economic growth, a situation developing countries find themselves in. This requires the government to invest in infrastructure supplemented by external financing. This chapter, therefore, discusses how levels of infrastructure development affect economic growth in Ghana, since 1986 to date. The focus is on road transport infrastructure and its impact on economic growth under successive Ghanaian governments. Using the Cobb-Douglas production function and Vector Auto-regression (VAR) approach our analysis shows a positive relationship between infrastructure development and economic growth. This explains governments' improved allocation and expenditure on infrastructure development and maintenance in the 2000s. Ghana governments' attempts to plan and prioritize development of infrastructure, roads in particular, and create a culture of maintenance are targeted at raising the country's competitiveness and attractiveness to foster growth of all sectors of the economy.