The Impact of High Inflation Rate on Net Foreign Direct Investment Flows in Egypt (1991-2022)

Document Type : Original Article

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Madina Higher Institute of Management and Technology

Abstract

This research aims to analyze the relationship between the inflation and foreign direct investment FDI in Egypt, using the data for the period 1991-2022, and using the autoregressive distributed lag (ARDL) methodology, this research uses the applied approach, and with regard to the variables of the research, annual data was used for all variables. Net foreign direct investment flows were used as a dependent variable, and the independent variables were the inflation rate, exchange rate, interest rate, government spending, and unemployment (as a control variable). The research found that there is a significant effect of inflation on foreign direct investment in the short and long term. The results indicated a negative significant relationship between foreign direct investment and inflation, exchange rate, interest rate, and unemployment. While the results indicated to a positive significant relationship, between foreign direct investment and government spending during the study period. The research proves that inflation is one of the most important determinants of foreign direct investment that must be addressed and its effects must be reduced in order to attract more foreign direct investment to Egypt, which works to advance development and raise Egyptian economic growth rates.

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