Do Financial Development, Trade Openness and Political Stability Complement for Egypt's Economic Growth?

This study examines the complement of financial development, trade openness, political stability and integrating government expenditure on Egyptian economy using time series annual data covering the period 1977 until 2018. This study used the ARDL-ECM estimates to determine the long and short-run cointegration between the series. The estimated results indicated that the financial development enhances growth in the long-run, while the political stability undermined the economic growth in the long-run. Interestingly, we found financial development, trade openness and government expenditure Granger cause economic growth in the short-run, while political stability Granger causes economic growth in both short and long-run; and a similar result with the causal relationship appeared in the strong causal relationship condition. Overall, this study showed that both financial development and trade openness gave evidence of causing growth, but the political stability does not. Thus, the reform policies should continue, while adopting measures to ensure that all the determinants are complementing to growth in Egypt as they are all pivotal and it is imperative for policy analysts to put into perspective when formulating policies as the study captures a novel political stability variable towards growth. [ABSTRACT FROM AUTHOR]