This book applies the Cointegrated Vector Autoregressive Analysis on annual data from 1971 to 2009 to investigate the transmission mechanism between foreign direct investment and a number of key macroeconomic variables in Ethiopia. The author places due emphasis on identifying the determinants of FDI and the FDI-Growth nexus. Also known as the Copenhagen School, this econometric technique is particularly relevant when data exhibit non-stationary properties. Its distinguishing feature, according to Professor Katarina Juselius- one of the most notable minds behind this school-, is that economic theory and applications have been developed in close cooperation. The author sheds a new light on the topic with an extended and revealing cointegration analysis preceded by a comprehensive theoretical exposition. The results from the analysis are no less fascinating.