Examining the determinants of inward FDI: Evidence from Norway

This paper examines the impact of macroeconomic factors on foreign direct investment (FDI) inflows in Norway under the location-specific advantage. Using cointegrating regressions with Fully Modified OLS (FMOLS) and the vector autoregressive and error correction model (VAR/VECM) on quarterly data, the study finds that the real GDP, sector GDP, exchange rate and trade openness have a positive and significant impact on FDI inflows. However, money supply, inflation, unemployment and interest rate produced significantly negative results. The results imply that in seeking to promote a dynamic competitive advantage in the home country, governments need to pay more attention to their macroeconomic policies to help fashion and reduce production and transaction costs of MNEs. Crown Copyright (C) 2015 Published by Elsevier B.V. All rights reserved.