The Nexus Between Artificial Intelligence and Economic Development: Evidence From Egypt

This study attempts to explore the causality-in-meaning between artificial intelligence (AI) and economic development in the context of the Egyptian economy. The research assumes a mutual causality: AI shapes economic growth, measured by the real GDP, while at the same time economic growth promotes AI development. In order to study the intricate dynamics underlying this relationship, we used a traditional econometric model applying the Johansen cointegration test and the Vector Error Correction Model (VECM). The results of this study present evidence of a bidirectional causality between AI and real GDP growth in the short run. In particular, real GDP growth is found to spur AI growth, and AI growth is found to support the growth of real GDP. In the long run, the paper shows a unidirectional causal relationship between real GDP and hours worked, with real GDP growth being found to cause increasing labour supply. As well, in the long-run, a unidirectional relationship is found to exist from real GDP to real capital accumulation, and real investment expenditures are found to be a determinant of real GDP growth. These findings indicate that AI, economic growth and macroeconomic determinants are interrelated and endogenous in Egypt, emphasizing the need to consider the effects over longer periods of time when examining these intricate relationships.