Abstract
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.
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