Abstract:

This research examines the impact of the foreign direct investment on economic growth and also the causal relationship of those variables in case of 26 OECD countries from Europe, during the years 2020-2021. The empirical analysis also includes other variables with influence in the economic environment as net exports, imports, openess of the economy, unemployment rate and inflation rate. The evidences based on the Panel Least Squares regressions with fixed effects, Vector Autoregressive (VAR) model and VAR Granger causality test highlighted a positive impact of foreign direct investment on economic growth and a unidirectional causal relationship from foreign direct investment to economic growth. This study concludes that the economic growth mainly reacts to its own historical evolution, but also to variations in foreign direct investment. The results of the research are useful for the macroeconomic policy makers and for the international investors interested in investing in OECD countries in Europe.