The nexus among foreign direct investment, trade openness, interest rates and economic growth: A new evidence from Egypt

This study examines the short- and long-term relationships between Foreign Direct Investment (FDI), trade openness, interest rates, imports, and economic growth in Egypt, employing the Vector Autoregression (VAR) methodology over the period from 1993 to 2023. The Granger causality test is applied to investigate the intertemporal causal linkages among the selected variables. The results reveal unidirectional Granger causality from interest rates to FDI, suggesting that changes in monetary policy play a significant role in influencing foreign investment inflows. Moreover, the study finds unidirectional causality from trade openness to GDP and from imports to GDP, indicating that greater openness to trade and the volume of imports, particularly of capital and intermediate goods, contribute to economic growth. However, no direct or short-term causality is observed from FDI to GDP. These findings highlight the importance of implementing policies that enhance macroeconomic stability, support trade integration, and optimize the structure of imports to support production. The study concludes with policy recommendations aimed at infrastructure modernization, regulatory reform, and export diversification to attract sustainable investments and foster long-term economic development. It also encourages future research to explore the roles of technological innovation, human capital, and environmental sustainability in shaping Egypt's economic trajectory.