The Connection between Foreign Direct Investment and Unemployment Rate in the United States
The Connection between Foreign Direct Investment and Unemployment Rate in the United States

Author(s): Mihaela Simionescu, Mirel-Daniel Simionescu
Subject(s): Economy
Published by: Scientia Moralitas Research Institute
Keywords: unemployment rate; FDI; vector error correction model; cointegration
Summary/Abstract: Considering that foreign direct investment (FDI) is the principal mechanism for economic globalization, this study analyzes the relationship between FDI and unemployment rate in the US. A vector error correction model was built for checking the long-run and the short-term relationship between FDI inflows and the absolute variation of unemployment rate in the current period compared to previous period. The quarterly data covered the period from 2000 to 2016. The empirical findings showed that only on long-run the changes in the US unemployment rate influenced the FDI. There was not any short-run relationship between FDI and variation in unemployment rate. The macroeconomic policies for attracting FDI in the US should take into account that the foreign investors are sensitive on long-term to the shocks in the unemployment rate.

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