Test of the Co-integration Relationship Between Foreign Investment Portfolio and Economic Growth in Egypt Econometric Approach Using “ARDL” Method During the Period of 2002-2016

Abstract

This study aims to test the co-integration relationship between portfolio foreign investment and economic growth in Egypt during the period of 2002-2016. Therefore, the descriptive analytical approach was used, as well as the econometric approach, where we reviewed an econometric processing of available data using the Auto-regressive Distributed Lag model "ARDL" and the Granger causal relationship test. The results of the test "ARDL" indicated the absence of a balancing relationship between the portfolio foreign investment and the economic growth in Egypt during the period of the study. This result contradicts the economic theory, and conforms to the findings of the study of MEHMET et al. (2014) and differs with the other previous studies included in the present study. We can explain that by the severe fluctuations experienced by the portfolio foreign investment in Egypt during the period that we analyzed due to local and global political and economic developments that affected Egypt negatively. The results of the causality Granger test indicated a lack of causal relationship between the two study variables. Finally, The study recommended the need to strengthen democracy in society in order to achieve and maintain political stability, as well as the establishment of policies and strategies by the Egyptian government that encourage long-term types of portfolio investments to reduce the volatility of this type of investment and contribute to economic growth.