The effect of country risk on foreign direct investment : evidence from Egypt

Abstract EN

This paper examines the effect of country risk on Foreign Direct Investment (FDI) in Egypt during the years 2005 - 2015.

We employ multiple regression analysis, to test the relationship among the selected variables that drive foreign direct investment flows to Egypt.

FDI has always been an interesting topic for research; nevertheless, to the authors' knowledge, the impact of country risk on FDI has not been examined before in Egypt.

Since FDI is a notable source of foreign currency income to the Egyptian economy, it becomes inevitable to study the variables that affect the flow of FDI in relevance to the economic outlook in general and country risk in specific.

The effect of country risk on FDI could significantly affect economic measurements such as economic growth and required rate of return.

Our results show that economic risk measurements have the most significant impact on foreign direct investments inflows to Egypt, while financial risk measurements have no significance.

Moreover, political risk is associated with foreign direct investment.

JEL classification: F21; F23; F3; F65; G32