Abstract. This study examines the foreign direct investment (FDI) attractiveness for Greece as a host country in the period 1998-2007. The purpose of this paper is to analyze the impact of variables, such as market size, labour costs, trade openness, taxes, inflation and economic stability. The manuscript applies a panel data approach (Fixed Effects estimator and GMM system estimator). In contrast to previous studies, this paper used a dynamic panel data to solve the problems of serial correlation and endogeneity. The empirical results indicate that the market size, trade openness, and labour costs are significant factors to explain inward FDI to Greece. These results indicate that the FDI attracting will be influenced by market size. Our results also show that Greece has some problems of macroeconomic stability, which discourages the investors.

Keywords: foreign direct investment; panel data; Greece.