Akademik Məlumat İdarəetmə Sistemi
Montenegrin Journal of Economics, vol.20, no.1, pp.171-179, 2024 (ESCI, Scopus)
One of the most critical phenomena facing policymakers in developed and developing countries is unemployment. Although economic theory suggests that attracting foreign investments is one of the most effective ways to mitigate this phenomenon, especially in developing countries, some empirical studies show contrary results. This article investigates the impact of foreign direct investment (FDI) inflows on the unemployment rate in Egypt. We examine annual time series data from 1976 to 2022 using a vector autoregressive model (VAR) and the impulse function (IRF) to capture the short-run impact of FDI on inflation, gross domestic product (GDP), exports, and unemployment rate. Our research hypotheses predict that foreign direct investment inflows increase the real gross domestic product (GDP) and exports while decreasing inflation and unemployment. The results show that FDI is vital in reducing inflation and increasing GDP and exports, even if it increases unemployment. This study's primary recommendation is that the Egyptian government should focus more on the quality of FDI by attracting foreign projects that offer more job opportunities to the local labour force.