The overall factors determining foreign direct investment: an applied study of the Egyptian economy for the period from 1980 - 2015

This paper attempts to identify the importance of macroeconomic variables in attracting foreign direct investment into the
Egyptian economy during the period (1980- 2015), by analyzing the
most important macroeconomic variables selected by reviewing the
previous economic studies. These variables include real GDP as a
measure of the size of the market, real exchange rate as a proxy of
competitiveness, level of international reserves as a proxy for
economic stability, and the relative interest rate that measures the
domestic cost relative to foreign cost of financing investment.
The results of estimating different models of the determinants
of foreign direct investment in Egypt showed that that real GDP has
the greatest impact on inflows of FDI in Egypt. The openness degree
was found positively related to the flows of FDI, which underlines the
importance of working to increase the export capabilities of the
Egyptian economy to become more attractive to foreign investment.
The relative interest rate was found positively related to the flows of
FDI. The real foreign exchange rate was found negatively related to
the flows of FDI which are concentrated in the Oil and Gas sector.
International reserves were found insignificant. The test of the causal
relationship between real GDP and foreign investment flows in Egypt
has shown a causal relationship in one direction from real GDP to
foreign direct investment. Accordingly, the ability of the Egyptian
economy to attract foreign direct investment depends on its ability to
achieve higher growth rate.