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This article presents detailed the impact of factors of production on economic growth in the Czech Republic in the period 1994-2015. The main research focuses on the impact of foreign direct investment (FDI) and on answering the question whether between GDP and FDI there is a causality relationship. The VECM model using the impulse responses function confirmed the occurrence of a bi-directional relationship between FDI and GDP in the Czech Republic. According to the empirical evidence, it was confirmed that the consumption demand and trade had a strong impact on GDP. However, these findings demonstrated that a weak FDI had an impact on economic growth.

Modelling GDP and FDI for Czech Republic—Impulse Response Functions in VECM