Interaction between foreign direct investment and real exchange rate: Department of Economics, NIKOLINA KOSTELETOU University, Athens; International and European Economic Studies, University of Athens, Panagiotis Liargovas Pliagov @ cc.uoa.gr; Economy and commerce, Greece Keywords: foreign direct investment, real estate exchange rate gel classification number: F3 1, F2 1 Abstract This paper studies the relationship between theory and demonstration, foreign direct investment. The results show that in big countries, such as the United States, Britain and Japan, the causal relationship is from real exchange rate to foreign direct investment. These results are consistent with the financial behavior of the prediction model. Causality goes hand in hand with the fixed or quasi-fixed currencies of small countries, such as European Union countries. These results are consistent with the model that emphasizes trade integration. The results show that the depreciation of the euro will not have a unified impact, and the inflow of foreign direct investment is in a unified Europe. In the past decade, the inflow and outflow of foreign direct investment in Europe, the United States and Japan have all increased significantly. There is evidence that the globalized and integrated market flows through foreign direct investment rather than trade. The average annual growth rate of capital outflow, which accounts for the world total, is nearly 30% in 1980. The product 0. 1 is three times the world export speed and more than four times the GDP speed, which affects the real exchange rate of foreign direct investment flows, and vice versa. Therefore, it provides important information for the driving force of the market. In addition, the determination of exchange rate policy should take into account the relationship between foreign direct investment and real exchange rate. Theoretically, there is no clear distinction about the relationship between directions. At present, there are at least six competing models, which can be summarized as: comprehensive trade model and financial behavior model. In the first category, we distinguish between trade and non-trade product models and portfolio models. In the second category, we distinguish between monetary payment and international payment.