The Nexus between Gross Capital Formation and Economic Growth: Evidence from Zimbabwe

Abstract

This article examined the nexus between gross capital formation and economic growth in Zimbabwe. Secondary data collected from World Bank`s World Development Indicators database, was used to empirically examine the nexus between the two variables, from 1960-2020. The autoregressive distributed lag technique was used. The findings show both unidirectional and bidirectional causality links between gross capital formation and economic growth during the three periods under study. Gross capital formation was positive, but not significant to influence economic growth in Zimbabwe. The period before dollarization was negative and significant to influence economic growth in Zimbabwe. The error correction had a negative and statistically significant relationship with economic growth in Zimbabwe. This article has practical implications especially for policy formulation and implementation at individual, corporate and government. The article closed the gap in knowledge by drawing attention to nexus of gross capital formation and economic growth in Zimbabwe during three different economic cycles.