Economic determinants of foreign direct investment

This thesis examines the economic determinants of FDI by analyzing the relationships between FDI, Gross Domestic Product (GDP), gross capital formation, and unemployment using robust econometric techniques such as unit root tests, ARDL modeling, and diagnostic evaluations. The findings reveal that GDP significantly and positively influences FDI in both the short and long term, underscoring the critical role of economic growth in attracting foreign investment, while gross capital formation also exerts a positive impact. In contrast, unemployment was found to have an insignificant effect on FDI, suggesting that labor market conditions are not a primary determinant of foreign investment decisions in Egypt. The ARDL bounds test confirmed a long-term cointegrating relationship between FDI and the explanatory variables, with a rapid adjustment speed of 90.08% to equilibrium following economic shocks. Diagnostic tests validated the model's reliability, confirming the absence of serial correlation, heteroskedasticity, and structural instability. These findings highlight the dynamic interplay between economic growth, domestic investment, and foreign capital inflows, offering valuable insights for policymakers aiming to foster a stable and conducive investment environment to drive sustainable economic development in Egypt. Key words: Foreign direct investment , GDP , Unmployment , ARDL Model , ,Egypt