FDI and long-term economic growth in Egypt
DOI:
https://doi.org/10.1956/jge.v13i1.452Keywords:
Egypt, foreign direct investment, long run economic growthAbstract
This research paper aims to empirically analyze the impact of FDI on the long-term economic growth of Egypt. An empirical model was developed to explain the aggregate output, including total labor force, capital stock, foreign direct investment, government expenditure, and the real exchange rate. Annual time-series data from 1990–2013 were then used to estimate the model. Prior to calculating this estimation, the properties of the time series were diagnosed, and an error-correction model was developed and assessed. The overall results suggest that foreign direct investment makes a positive, yet weak and insignificant, contribution to the long-term economic growth of Egypt. This finding warrants further investigation to explore the possible reasons behind it, such as the degree of spillover that FDI has on economic growth and its impact on employment in areas like job creation, wage structure, research, and development.
References
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Hansen, H. and J. Rand, 2006. "On the Causal Links between FDI and Growth in Developing Countries", World Development, 29(1): 21-41.
Johansen, S. and Juselius, K (1988). “Hypothesis testing for cointegration vectors with an application to the demand for money in Denmark and Finlandâ€, Preprint University of Copenhagen.
Kamin, S.B. and J.H. Rogers (2000). “Output and real exchange rate in developing countries: an application to Mexicoâ€, Journal of Development Economics, 61(1): 85-109.
Kiguel, M.A. and N. Liviatan (1992). “The business cycle associated with exchange rate based stabilizationâ€, World Bank Economic Review, 6(2): 279-305.
Krugman, P. and L. Taylor (1978). "Contractionary effect of devaluation", Journal of International Economics, 8(3): 445-456.
Pal, S. (2014). “Real Exchange Rate Effects on Output in Indiaâ€, Journal of Quantitative Economics, 12(1): 168-174.
Sargan, John Denis & Bhargava, Alok, 1983. “Testing Residuals from Least Squares
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Trevino, L.J., J.D. Daniels and H. Arbelaez (2002). "Market reform and FDI in Latin America: an empirical investigation", Transnational Corporations, 11(1): 29-48.
Upadhyaya, K. F. (1999). "Currency devaluation, aggregate output, and the long run: an empirical study", Economics Letters, 64(2): 197-202.
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Akinlo, A. 2004. "Foreign direct investment and growth in Nigeria: An empirical investigation", Journal of Policy Modeling, 26(5): 627–639
Barro, R. J. and X. Sala-i-Martin, 1995. Economic Growth, New York: McGraw-Hill.
Barro, R J., (1991). "Economic Growth in a Cross Section of Countries", Quarterly Journal of Economics, 106(2): 407 - 443.
Borensztein, E., J. Gregorio, and J-W. Lee (1998). "How does foreign direct investment affect growth?â€, Journal of International Economics, 45(1):115-135.
Bosworth, B.P. and S. M. Collins (1999). "Capital flows to developing economies: implications for saving and investment", Brookings Papers on Economic Activity, 1: 143-169.
Burnside, C. and D. Dollar (2000). "Aid, policies and growthâ€, The American Economic Review, 90(5): 847-868.
Carkovic, M. and R. Levine (2002). “Does Foreign Direct Investment Accelerate Economic Growth?â€, Working Paper (University of Minnesota Department of Finance, available at: www//ssrn.com/abstract=314924).
Cooper, R. (1971). "Currency devaluation in developing countries", Essays in International Finance, 86, Princeton University.
De Mello, L.R., Jr. (1999). “Foreign direct investment-led growth: Evidence from time series and panel dataâ€, Oxford Economic Papers, 51(1): 133–151.
Dunning, J.H. (1993). Multinational Enterprises and the Global Economy (Wokingham: Addison-Wesley).
Borensztein, E., De Gregorio, J. and Lee, J-W. (1998). “How does foreign direct investment affect economic growth?â€, Journal of International Economics, 45(1): 115-135.
ELLER, M., P. HAISS, and K. STEINER (2005). "Foreign Direct Investment in the Financial Sector: The Engine of Growth for Central and Eastern Europe?", EuropaInstitut Working Paper, 69, Vienna University of Economics and Business Administration.
Engle, R. and C. Granger (1987). "Cointegration and error correction: representation, estimation, and testing", Econometrica, 55(2): 25176.
Ericsson, J. and M. Irandoust (2000). "On the causality between foreign direct investment and output: a comparative studyâ€, The International Trade Journal, 14(4), 1-26.
Hansen, H. and J. Rand, 2006. "On the Causal Links between FDI and Growth in Developing Countries", World Development, 29(1): 21-41.
Johansen, S. and Juselius, K (1988). “Hypothesis testing for cointegration vectors with an application to the demand for money in Denmark and Finlandâ€, Preprint University of Copenhagen.
Kamin, S.B. and J.H. Rogers (2000). “Output and real exchange rate in developing countries: an application to Mexicoâ€, Journal of Development Economics, 61(1): 85-109.
Kiguel, M.A. and N. Liviatan (1992). “The business cycle associated with exchange rate based stabilizationâ€, World Bank Economic Review, 6(2): 279-305.
Krugman, P. and L. Taylor (1978). "Contractionary effect of devaluation", Journal of International Economics, 8(3): 445-456.
Pal, S. (2014). “Real Exchange Rate Effects on Output in Indiaâ€, Journal of Quantitative Economics, 12(1): 168-174.
Sargan, John Denis & Bhargava, Alok, 1983. “Testing Residuals from Least Squares
Regression for Being Generated by the Gaussian Random Walkâ€, Econometrica, 51(1): 53-74.
Trevino, L.J., J.D. Daniels and H. Arbelaez (2002). "Market reform and FDI in Latin America: an empirical investigation", Transnational Corporations, 11(1): 29-48.
Upadhyaya, K. F. (1999). "Currency devaluation, aggregate output, and the long run: an empirical study", Economics Letters, 64(2): 197-202.
--, D. Dhakal and F. G. Mixon, Jr. (2000). "Exchange rate adjustment and output in selected Latin American countries", Economia Internazionale, 53(1): 107-117.
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Published
31.03.2017
How to Cite
Alhakimi, S. (2017) “FDI and long-term economic growth in Egypt”, Journal of Global Economy, 13(1), pp. 65–74. doi: 10.1956/jge.v13i1.452.
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