Economic Dimensions of The Phenomenon of Capital Flows From Developing Countries “Applying on the Egyptian Economy”

The thesis hence aims at studying the economic dimensions of capital flows from developing countries phenomenon with an application of Egypt’s Economy The important results stem from this work are as fllowing: 1. There is no agreement in the economic literature on the definition of the capital flows from developing countries. This may lead to different estimations of the volume of the phenomenon. 2. Studying the trend and simultaneity of capital flows from the developing countries as a whole and on the level of the geographical regions and from Egyptian economy showed the following points: 2/1: The capital outflows are fluctuated, during the period of study, (1977 to 2004). 2/2: The simultaneity in capital flows from the developing countries on the geographical region has been achieved from 1977 to 1979, 1982 to 1986 and during year 1987. 2/3: The capital flows from the Egyptian economy are not in one trend, they are the most volatile compared to the capital flows from the developing countries on the Aggregate level and from the Middle East and North Africa during the period from 1977 to 2004. 3. Results of the econometric model of the determinants of capital flows from the Egyptian economy are represented in the following. 3/1: There is a positive relationship between the external debt and the capital flows from the Egyptian economy with statistically Significant at 0% level; the increase of the external debt with one billion dollars leads to the increase of the capital flows from the Egyptian economy as a percentage of the Gross Domestic production of 1.5%. 3/2: There is a positive relationship between the Capital Gains of the Egyptian stock exchange and the capital flows from the Egyptian economy with statistically Significant at 0% level; the increase of the Capital Gains of the Egyptian stock exchange by 1% leads to the increase of the capital flows from the Egyptian economy to the Gross Domestic production ratio by 0.1%. 3/3: There is a positive relationship between the financial repression and the capital flows from the Egyptian economy with statistically Significant at 1% level; The financial repression rise of 1% leads to the increase of the capital flows from the Egyptian economy to the Gross Domestic production ratio by 0.03%. 3/4: There is a negative relationship between the interest rates on the Domestic Deposits and the capital flows from the Egyptian economy at level of statistically Significant 0% , the increase of interest rates on the deposits by 1% leads to reduction in the ratio of the capital flows from the Egyptian economy to the Gross Domestic production by 1.41%. 3/5: There is a positive relationship between Egyptian exchange rate overvaluation and capital flows from Egyptian economy at level of statistically Significant at 1%; the overvaluation of Egyptian exchange rate with only one leads the increase of the ratio of capital flows from the Egyptian economy to the Gross Domestic production by 8.97%. 3/6: There is a positive relationship between inflation and the capital flows from the Egyptian economy at level of statistically Significant 1%; increase of consumers prices index by 1% leads to the increase of capital flows from the Egyptian economy to the Gross Domestic production ratio by 4.46%. 3/7: There is a positive relationship between the political instability and the economic crises and the capital flows from the Egyptian economy at level of statistically Significant 0%; the political instability and the economic crises leads to the increase of capital flow from the Egyptian economy to the GDP ratio by 4.05%. 3/8: The econometric model explains 92.3% of changes in the ratio of capital flows from Egyptian economy while the rest 7.7% is explained by other variables that are specified outside of the model at level of statistically Significant at 0%. 4. Results of the econometric model of the capital flows effects from the Egyptian economy on the economic growth in the long run by using the “Cointegration” are represented in the following: 4/1: There is a negative relationship between the capital flows from the Egyptian economy and the economic growth in the long run at level of statistically Significant of 10%; increase of the ratio of capital outflows - that are estimated by the world bank methodology - to the GDP leads to the decrease of GDP per Capita by 1.01%. 4/2: There is a negative relationship between the capital flows from the Egyptian economy and annual growth rate of population in the long run at level of statistically Significant of 1%; increase of the annual growth rate of population by 1%, leads to decrease of GDP per capita by 3.23%. 4/3: There is a positive relationship between the capital flows from the Egyptian economy and the technological improvements in the long run at level of ratio Significant of 1%; the one percent (1%) technological improvements radio leads to the increase of GDP per capita by 0.43%. 4/4: The econometric model explains 69.3% of changes in the long run economic growth, while 30.7% is explained by other variables that are specified outside the model at level of statistically Significant of 1%. 5. The developing countries must depend on restricting capital outflows for a fixed time to avoid dodge of these restrictions and give the opportunity for applying the economic reform policies and eliminating economic distortion, in facing the phenomenon of capital flows from developing countries.