Abstract
Many developments had occurred in the global economy. Among these developments is the increase of capital flows across countries. Foreign direct investment (FDI) is considered to be one of the cross border capital flows that countries use in order to enhance their economic growth. This study focuses on how FDI impacts the economic growth of Egypt for a period from 1980 to 2018. The study applies Johansen co-integration, Vector Error Correction Model (VECM) and Ganger causality in the methodology. Johansen co-integration results show that a long run relationship exists among the variables. In addition, VECM shows that FDI exerts a positive significant impact on the economic growth of Egypt. Finally, a bidirectional causality between FDI and the economic growth of Egypt is shown by Granger causality.Keywords: Foreign Direct Investment, Economic Growth, Johansen Co-integration, Vector Error Correction Model, Granger Causality TestJEL Classifications: C32, F6, F21, O11, O16DOI: https://doi.org/10.32479/ijefi.11762
Highlights
The word international became very important to everyone recently
The aim of this study is to examine how foreign direct investment impacts the economic growth of Egypt from 1980 to 2018
The results showed the following; (a) in Pakistan, Foreign direct investment (FDI) and economic growth have a significant long run relationship but for Turkey the results were insignificant, (b) for both Turkey and Pakistan, trade openness and economic growth have a significant long run relationship, (c) a significant long run relationship existed between economic growth and exports in Turkey but it was insignificant for Pakistan, (d) in Pakistan a bidirectional causality existed among exports and trade openness and in Turkey, it existed among exports and FDI
Summary
The word international became very important to everyone recently. Countries are trying to adapt to the international changes by modifying their structures and developing their strategies. Financial globalization is considered to be among the most significant developments that occur in the global economy, where the movement of capital became more mobile than it was ever in the past. It is one of the globalization types that existed since the mid of 1980s, where a wave of an increase in the financial flows between industrial countries and with developing countries as well had emerged. Some developing countries might face adverse effects from the cross border financial flows more than the developed as they are more sensitive to any crises or disruptions (Kose et al, 2006)
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