Macroeconomic effects of foreign direct investment inflows on the host country

The dissertation examines the causal relationship between economic growth rates and FDI inflows in 11 OECD countries over 12 years. Using the Hodrick-Prescott filter to decompose FDI and GDP into their cyclical and trend components, tests for Granger causality provide significant evidence of reverse causality within the trend. Impulse response analysis confirms these results. In response to a 1% shock in growth of GDP and GDP component growth, long-run FDI inflows rise by approximately 0.5%.