This paper examines whether foreign aid contributes to attracting foreign direct investment (FDI) in aid receiving countries. Using both homogeneous and heterogeneous panel cointegration techniques, I find that the effect of foreign aid on FDI is negative. This is in contrast to previous studies...

This paper studies the effect of foreign direct investment (FDI) on the transmission of international business cycles. I document for the G7 countries between 1991 and 2006 that increases in bilateral FDI linkages are associated with more synchronized investment cycles. I also find that the...